Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the chair]

PRIVATE BUSINESS

GREATER LONDON COUNCIL (GENERAL POWERS) BILL

Order for consideration read.

To be considered tomorow.

SCOTTISH AMICABLE LIFE ASSURANCE SOCIETY BILL

SUFFOLK COASTAL DISTRICT COUNCIL BILL

As amended, considered; to be read the Third time.

BRITISH RAILWAYS BILL

Order for consideration read.

To be considered upon Monday next at Seven o'clock.

Oral Answers to Questions — FOREIGN AND COMMONWEALTH AFFAIRS

Nuclear Proliferation

Mr. Thorne: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on Her Majesty's Government's policy on halting nuclear proliferation.

Mr. Cryer: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on Her Majesty's Government's policy in halting nuclear proliferation.

Mr. Clemitson: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on Her Majesty's Government's policy on halting nuclear proliferation.

The Minister of State for Foreign and Commonwealth Affairs (Mr. Roy Hattersley): We believe that the Non-Proliferation Treaty of 1968 remains the best available means of halting the spread of nuclear weapons and nuclear explosives technology. We have taken active steps to encourage the widest possible membership of the treaty and are constantly in touch with other Governments to promote further non-proliferation measures.

Mr. Thorne: I wonder whether the Foreign Secretary had the opportunity while in China to discuss with the Chinese Government their probable agreement to the treaty and participation in the spirit thereof. If so, will my right hon. Friend give us any details of those discussions?

Mr. Hattersley: There is a later Question on the Order Paper about my right hon. Friend's visit to China, which he is answering himself. I am sure it is important that this matter should be dealt with then by him.

Mr. Gwynfor Evans: Is the Minister aware that the present British Government and past British Governments must bear their share of responsibility for the spread of nuclear weapons, in that they have not given a lead in renouncing them? Is he further aware that the


British Government have not even implemented the policy of the Labour Party, as declared at its own annual conference, in regard to Polaris?

Mr. Hattersley: The hon. Gentleman significantly leaves out of his question one word, "unilateral", in speaking of renunciation. It is not and never has been my view that unilateral renunciation would promote peace in the world.

Mr. Cryer: Does my right hon. Friend agree that the Government's efforts in halting the spread of nuclear proliferation would be helped if there were a Minister specifically appointed for disarmament here in the House of Commons, as was promised in 1964? Should not the Prime Minister be concerned to make that sort of appointment from among those with a long history of work in the Labour movement rather than appoint a hack from The Times or consider various dubious people in the City and make them Lords?

Mr. Hattersley: All the questions that my hon. Friend asks about ministerial responsibilities are not only unrelated to the Question but 14 years out of date.

Mr. Cryer: Disarmament is never out of place.

Mr. Hattersley: The Government should be judged by what they have achieved rather than by who is responsible for those achievements in Ministries. If my hon. Friend will look at our achievements in the nuclear proliferation field, he will see that they are considerable.

Mr. Clemitson: Is my right hon. Friend satisfied that there are sufficient safeguards concerning trade in nuclear materials and nuclear installations to ensure that recipient nations do not develop nuclear weapon capability?

Mr. Hattersley: I can speak only for the United Kingdom and our policy on these matters, and certainly we accept all the safeguard régimes proposed to us. Indeed my right hon. Friend the Prime Minister, in his previous capacity, gave a very long answer to the House describing how we insist on safeguards being applied before we co-operate in any of these multilateral affairs.

Mr. Goodhew: Will the right hon. Gentleman remind his hon. Friend that the previous Labour Government had a Minister for disarmament in Lord Chalfont but found him redundant because the present Chancellor of the Exchequer, who was then Minister of Defence, did all the disarming on his own unilaterally?

Mr. Hattersley: I agree that it was difficult to recognise Lord Chalfont in the description given by my hon. Friend in his question, but much more important than that—if there is a serious content to the hon. Gentleman's question—is the fact that the Government are wholly committed simultaneously to the policies of defence and disarmament. Those two things have to go hand in hand. Detente and deterrence cannot be separated, and we are wedded to both those concepts.

Armaments (International Trade)

Mr. Robin F. Cook: asked the Secretary of State for Foreign and Commonwealth Affairs if Her Majesty's Government will raise in the United Nations Security Council the threat to world peace from the international trade in armaments.

Mr. Arthur Latham: asked the Secretary of State for Foreign and Commonwealth Affairs if Her Majesty's Government will raise in the United Nations Security Council the threat to world peace from the international trade in armaments.

Mr. Flannery: asked the Secretary of State for Foreign and Commonwealth Affairs if Her Majesty's Government will raise in the United Nations Security Council the threat to world peace from the international trade in armaments.

Mr. Hattersley: No, Sir. Last year my right hon. Friend drew the attention of the United Nations General Assembly to the need to bring to an end, by serious multilateral negotiations, the enormous waste of resources on weapons of destruction. This is the most practical approach.

Mr. Cook: Will my right hon. Friend study the legislation currently before Congress which places restrictions on the


sale of American arms to countries which consistently violate basic human rights? Is that not a lead we could follow? Could we not, as a first step, withhold armaments from South Korea, where the Government have just arrested the Opposition leaders for calling on the West to withhold trade until democratic freedoms are restored?

Mr. Hattersley: I think my hon. Friend knows that, in terms of individual negotiations for arms sales, it is not the practice of this or any other Government of comment. I hope my hon. Friend realises that the Government operate a very stringent licensing system before allowing the sale and export of arms. We apply political, economic and military criteria which are just as effective and proper in the preservation of our interests as is the American legislation.

Mr. Blaker: Is it not clear from the statement by the Secretary of State for Defence, reported today, that the military spending of the Russians has amounted to three times what they have admitted and more than 11 per cent. of their gross national product that the greatest threat to peace arises from the Russian arms build-up? May we expect from the Government, in view of what the right hon. Gentleman said, an initiative, which no doubt would be given enthusiastic support from Government supporters below the Gangway, to persuade the Russians to reduce the percentage of their GNP that they spend on arms to the same as our own?

Mr. Hattersley: That initiative is and has been taking place for some time in the mutual and balanced force reduction talks in Vienna.

Mr. Corbett: Is my right hon. Friend satisfied with the criteria laid down for deciding whether to supply arms to foreign countries, and are those criteria kept under constant review? Can he also impress upon his colleagues the need to include not simply weapons but guidance and other systems when making these decisions?

Mr. Hattersley: Clearly, the decisions to which I refer have to be related to a wide variety of materials, not all of which are directly military in the narrow sense of that word. The criteria vary from

time to time according to judgments about the changing world situation. I am content that those criteria, as they apply at any one time, are right.

Mr. Maudling: Can the right hon. Gentleman tell the House what criteria the Soviet Union applies to its enormous trade in armaments?

Mr. Hattersley: That is a question for Mr. Brezhnev and not for me.

Far East (Secretary of State's Visit)

Mr. Forman: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the outcome of his visit to the People's Republic of China.

Mr. MacFarquhar: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on his recent visit to the Far East.

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Anthony Crosland): I visited China from 3rd to 9th May, and Japan from 9th to 11th May. In China I had talks with the new Prime Minister, Mr. Hua Kuo-feng, and with the Minister of Foreign Affairs and the Minister of Foreign Trade. In Japan I also had talks with the Prime Minister, Mr. Miki, the Foreign Minister and the Minister of Foreign Trade. The talks in both countries were cordial and constructive, and covered a wide range of international and bilateral issues.

Mr. Forman: Although many Opposition Members welcome the fact that the Foreign Secretary carried out his trip to China as, I believe, the first ministerial contact between the Labour Government and the Chinese Government, will he accept that the talks, in his own words according to Press reports, did not amount to anything very much, and that this may have had a lot to do with the fact that in his talks on detente in particular he seemed to act as little more than an unpaid apologist for the Soviet Union?

Mr. Crosland: That is hardly the view of the Chinese Ministers to whom I was talking, who took the completely contrary view and constantly criticised me for the fact that I was adopting an opposite


stance to that to which the hon. Gentleman referred. I tried to make two matters clear the whole time—two matters which I think represent the views of 90 per cent. of hon. Members. I tried to make it clear that, on the one hand, the West must remain strong, vigilant and determined against the possibility of a Soviet threat and, on the other hand, that that did not rule out the notion of the principle of detente, which is a general attempt to diminish the tension between East and West.

Mr. MacFarquhar: Is my right hon. Friend aware that everyone concerned to see better relations between China and this country will be glad that he made this trip so soon after his appointment and that many Sinologists in the country are worried about the grave imbalance of academic exchanges between the United Kingdom and China? Did he discuss the possibility of senior British scholars spending sabbaticals in China for periods of three to six months?

Mr. Crosland: I am obliged to my hon. Friend for his opening remarks. The question of cultural exchanges was raised, and there was agreement on both sides that we wanted more of those exchanges than now occur, although quite a number occur at present. I take on board my hon. Friend's point about the importance of academic visits. Having secured this agreement in principle for more exchanges, I should like now, through normal diplomatic channels, to settle the detail of how we see them taking place.

Sir Anthony Royle: Is the right hon. Gentleman aware that many of us welcome his visit to Peking representing Her Majesty's Government but were surprised by the very short time that he deigned to spend in Hong Kong, the biggest British colony in the world today? Is he aware, secondly, that many of us would like to know whether he reached any agreement on further sales of the Concorde, on sales of the Harrier, or on the subject of air traffic rights into Peking?

Mr. Crosland: On the question of Hong Kong, I, too, greatly regret that I had an opportunity for only a brief talk with the Governor, although I was in Hong Kong as recently as December and

spent some time there talking over mutual problems.
As for the Concorde, the Chinese made it absolutely clear that they would take no decision until they had seen the Concorde in service and had been able to assess how commercially successful or otherwise it was. The Harrier was not mentioned.
I made the point about air traffic rights, but I cannot say that I got any response, other than a somewhat inscrutable one.

Mr. Hooley: In my right hon. Friend's conversations with Chinese and Japanese leaders did he discuss the general situation in Southern Africa and the possibility of concerting policies, for example, between Japan and this country towards that part of the world?

Mr. Crosland: I discussed Southern Africa at some length in both China and Japan. In the case of China—I think that the greatest curiosity is about what the Chinese approach might be—it is fair to say that the discussions had a somewhat one-sided character. I explained the British position on Southern Africa at some length, but I did not receive an immensely long answer on what the Chinese attitude might be.

Mr. Adley: In the Government's formulation of foreign policy in Asia, does not the right hon. Gentleman agree that China, with her resolute opposition to Soviet imperialism and with her purchases of British aerospace equipment, makes a better and more reliable ally for this country than the Indian Government, whose current affairs seem to revolve round opposition to the Concorde and a refusal to accept her responsibility for the Malawi Goans?

Mr. Crosland: At this early stage in my career in a new position I am reluctant to make comments of an exceedingly global or philosophical character. I prefer to confine myself to saying that we welcome allies of all kinds in all parts of the world.

Mr. Fernyhough: As the Opposition, at the time when the former Labour Government recognised China, were bitterly opposed to that step and as a substantial number of Opposition Members between 1950 and 1954 were prepared to wipe out China, does not my


right hon. Friend think that it was fortunate that we did not follow their example, for otherwise we should never have got the invitation?

Mr. Crosland: If I may say so, there is great wisdom and merit in my right hon. Friend's proposition.

Sir Frederic Bennett: During the right hon. Gentleman's visit, did he obtain any instructive or refreshing views from the Chinese on how they regard the bogus Russian interpretation of détente?

Mr. Crosland: I shall not be inscrutable on this subject at all. I spent a considerable number of hours listening to the Chinese views on détente and on Soviet strength and intentions. As I said earlier—if I may be serious about this, because one or two exchanges today have been slightly less than serious—I made two matters clear the whole time. The first was that we accepted utterly and completely the need for the West to be strong in a military sense and vigilant against any possible Soviet threat. The second matter which I made clear was that, nevertheless, that did not mean that we could surrender the policy of détente, which has the command of the huge majority of hon. Members.

Middle East

Mr. Goodhart: asked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a further statement about the Middle East.

Mr. Hattersley: We hope that negotiations can soon be resumed with the aim of achieving a just and lasting peace in the Middle East.

Mr. Goodhart: After all these months of governmental inactivity, in which the whole of the Middle East has been torn apart by violence, will the Minister contemplate taking positive action in conjunction with our EEC partners to support the fragile ceasefire?

Mr. Hattersley: We are certainly available to take any initiative or to participate in any initiative which seems to bring the prospect of peace to that troubled country. There is no future for the Lebanon in countries gratuitously mounting initiatives which only end in failure. If there seems to be a right moment for a greater EEC initiative, we

shall be happy to take part in it. but it has to be the right moment.

Mr. Roy Hughes: The situation on the West Bank is now developing into a normal one where the native population is rebelling against the alien occupying Power. What are the Government doing with a view to getting Israeli withdrawal from this territory?

Mr. Hattersley: My hon. Friend will be aware of the draft resolution of the United Nations of 25th March and our attitude towards it, which was a clear indication of our position. Our opinion is that constant building in these areas will impede the progress towards peace, and we regret this.

Mr. Walters: Is not the Minister being rather complacent about British activity? Does not the situation on the West Bank highlight the fact that the Middle East is not static, and at any time can be explosive? Should not Britain and Europe be more active?

Mr. Hattersley: I understand the attitude that Britain should be more active in these matters, but that is a misunderstanding of Britain's rôle and the era in which we live. Initiatives for promoting a stable situation in the Middle East lie with the United States of America, which has had a great deal of success in the past. Counter-initiatives could only make the situation more perilous than it is.

Mr. Luce: Will the Minister seek to obtain a Community statement designed to warn the Israelis that another war in the Middle East is inevitable if they insist on constructing settlements in Arab-occupied territory? They should now gradually withdraw from Arab-occupied territory.

Mr. Hattersley: I have made my view on this matter very clear. I do not think that the purpose of peace in the Middle East would be best served by getting a co-ordinated EEC policy on that particular matter.

Zambia

10. Miss Joan Lestor: asked the Secretary of State for Foreign and Commonwealth Affairs what assistance of a defensive nature is being given to Zambia in order to protect her territorial integrity


against possible attacks from Southern Rhodesia.

The Minister of State for Foreign and Commonwealth Affairs (Mr. Edward Rowlands): The Government are not providing assistance for this purpose. But we are in continual close touch with the Zambian Government about matters relating to Rhodesia and its effects on Zambia.

Miss Lestor: Bearing in mind that Ian Smith has made it perfectly clear that he intends to pursue the freedom fighters across the Zambian border, does not the Minister agree that it is morally right for us to supply arms to Zambia, either as aid or on favourable terms, in order to stand up morally on this issue and to avoid the Communist countries supplying the arms, as otherwise they will do? If this happens, we shall be faced with the criticism of allowing Communist influence to dominate.

Mr. Rowlands: We issue export licences to Zambia on a regular basis, and manufacturers are free to sell arms, subject to export licences.

Mr. David Steel: Does any understanding exist between the two Governments about the British Government giving help to Zambia in the event of an incursion over her borders from the south?

Mr. Rowlands: We have no military guarantees between ourselves and Zambia, but we are keeping the situation under review.

Mr. Spearing: Does the Minister remember that some time ago, when Zambia helped us—at some cost to herself—with the sanctions policy by closing her trading links with the South, the British Government provided some assistance to that country? Would the Government investigate whether there has been any question from the Zambian Government about further assistance?

Mr. Rowlands: We have not received any requests for specific military aid.

Sir John Rodgers: What assistance of a military nature is being given to the Rhodesians in order to protect them from terrorist incursions from Zambia and Mozambique?

Mr. Rowlands: We have no intention of giving any military assistance to an illegal regime.

Mr. Ian Lloyd: Ignoring the element of fantasy in both the question and the answer, will the Government accept that the people of Britain, certainly in my constituency, are not prepared to see the people of Rhodesia sold down the river to terrorism?

Mr. Rowlands: The Government are not prepared to see the vast majority of Rhodesian citizens, black and white, sold down the river to any minority regime with the support of hon. Members opposite.

Cambodia

Mr. Wall: asked the Secretary of State for Foreign and Commonwealth Affairs if he will raise at the United Nations as a threat to world peace the genocide taking place in Cambodia.

Mr. Rowlands: While I, too, have read with great concern the recent reports of events in Cambodia, I do not think they constitute a threat to world peace. Nor, I should add, have I any means of verifying the truth of the allegations that have been made.

Mr. Wall: If someone were condemned to death in South Africa, Chile or Spain, the Government would soon protest. In Cambodia half a million people have been condemned to death—according to reports, everyone who is over the age of 12 and educated either has been or will be liquidated. Why are the Government not making any protest? Why are there these double standards?

Mr. Rowlands: First, we would consider making diplomatic representations if we had any diplomatic representatives in Cambodia. Secondly, any protest we made would depend on the effectiveness of such representations. The limited evidence we have suggests that such representations would be nothing but counterproductive.

Mr. Newens: The present situation in Cambodia results directly from the appalling bombing and the invasion of that country by the United States, against which hon. Members opposite never raised the protest of genocide. It would


have been better to have supported the original Government of Prince Sihanouk. This proves that support for reaction does not always pay.

Mr. Rowlands: The situation is tragic now, as it was in the past.

Mr. Maudling: In order to avoid the charge of double standards, will the Government make every effort to find out what is happening? If the stories are justified, will they make strenuous protests?

Mr. Rowlands: We have limited means of finding out what is happening. A lot of information is provided by refugees fleeing across the border. This does not mean that we are not deeply concerned about the evidence. But the form of any representation and the effective result, if any, are what we must consider, and we feel that in this case such representations would be counter-productive.

Mr. Maudling: But will the Government make every effort to find out?

Mr. Rowlands: Of course we are continually trying to find out information of this kind, whatever country is involved

Mr. Lawrence: If the Government discover that the stories are true and that over half a million people have died during the past 12 months, out of a population of over 8 million, will they make sure that steps are taken in the United Nations to raise the matter and, at the very least, will they withdraw our representation in Cambodia?

Mr. Rowlands: We cannot withdraw representation which we have not got.

Sir Anthony Royle: In view of the unsatisfactory nature of the Minister's reply, I beg to give notice that I shall raise the matter on the Adjournment.

Cyprus

Mr. Townsend: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on Cyprus.

Mr. Hattersley: Her Majesty's Government actively support Dr. Waldheim's efforts to promote substantive negotiations between the Cyprus communities. They are the fora from which progress

is most likely. Today the Select Committee on Cyprus publishes its report. The Government will formally comment upon it in the usual way. However, in the light of the report's contents, the House would expect a general reaction now. The Government regret that the Committee did not take the opportunity to make an impartial and constructive contribution to solving the Cyprus problem. The Committee ignored evidence demonstrating that military intervention in Cyprus was neither right nor possible. The report offers no evidence to show that the Committee's favoured strategy of isolating Turkey internationally would promote a solution. The Government of course accept the view that we should do all we can to achieve a solution. That is, and always has been, our policy.

Mr. Townsend: Does the right hon. Gentleman appreciate that the all-party report bears out what many of us have been saying, namely, that Government policy in this area has been badly misjudged, and that it also brings into question the judgment of the Prime Minister? Will he look carefully at the colonisation of northern Cyprus, bearing in mind that about 35,000 Turks have been introduced from the mainland to Cyprus at a time when the Greek Cypriot community in the north has been reduced to about 8,000?

Mr. Hattersley: I am conscious of the report and I spent my lunch time reading it. I also had the benefit of hearing the comments leaked on the radio at 8 o'clock this morning. The report contains a set of conclusions with which I disagree, and they are based on a number of facts which seem to me not to stand examination.

Mr. Christopher Price: The House will be in some difficulty. As my right hon. Friend may have read the report more carefully than others have done, will he convey to his right hon. Friend that his welcome translation to the Foreign Office gives him a real opportunity, whatever may have happened in the past, for a new British initiative, both through European institutions and through the coming Commonwealth Prime Ministers' Conference, to settle the Cyprus problem in a wider context, since clearly the present inter-communal talks have failed?


Is my right hon. Friend aware that his tetchy comments on this report will not help in any way to get a real solution to this problem?

Mr. Hattersley: I always accept my hon. Friend's strictures, and I take it from him that the object of the report, of which he is a part author, was to contribute to the future rather than to dwell in a maudlin fashion on the past. He can be assured that my right hon. Friend will continue the Government's policy of trying to promote a solution to the Cyprus situation. My judgment of the report is that the idea that a solution can be brought about by isolating Turkey and relegating her to a situation of international isolation is not only wrong but diametrically wrong.

Mr. Jim Spicer: Will the right hon. Gentleman accept that many of us on this side of the House, and, I hope, on the other side too, will welcome his initial reaction to this report, which takes no account whatsoever of the persecution of the Turkish minority in Cyprus between 1960 and 1974? Will he confirm that in his view and in the view of the Government we should not reappoint the Select Committee if it is going to continue to produce reports that are as utterly biased as this one?

Mr. Hattersley: I am much obliged to the hon. Gentleman. Much as I am grateful for the first part of his question, I can hardly endorse the second part. It is a matter for the House what it does in terms of appointing Select Committees. It is a matter for Select Committees what they write. They are free to write and say what they want, so long as it is agreed that I am free to write and say what I conclude about their recommendations.

Mr. Corbett: The contents of the Select Committee's report apart, I plead with my right hon. Friend and the Secretary of State to put some new private and public initiative behind the drive to find a solution to the problem on this tragic island, which is of great concern. Will he assure the House that every possible step is being taken to encourage a successful outcome of the inter-communal talks as speedily as possible?

Mr. Hattersley: I am well aware of my hon. Friend's interest in these matters.

We have had a number of conversations about them. I hope that I have done something to convince him, but, if not, let me reiterate that the Government will bend all their efforts to bring about a solution to this wholly tragic situation, which no one doubts has gone on for an intolerably long time. We have done our best within the EEC through private initiatives and through other fora, and we have done so in the belief that making progress is more important than making declarations. I know that that view is shared by my hon. Friend, and we shall go on operating in that way, because that seems the practical and right way to proceed.

Mr. Maudling: I have not had a chance to read the report and therefore cannot comment on its substance. In view of the unusually terse remarks of the right hon. Gentleman about the report, may we assume that there will be an early debate on it in the House? This is of great importance. We support the view that, whatever the past may have contained, the future and the present are important, and new initiatives of any kind that might produce results will be welcomed by the Opposition.

Mr. Hattersley: The question of a debate is not for me but for the Leader of the House. I should welcome a debate, not in terms of clarifying facts or correcting statements relating to this House and to the performance of the Government, but simply to ensure that any damage which may have been done in terms of the Government's initiative is corrected so that world opinion realises what the Government's attitude is to the report and that the report does not speak for the Government.

Mr. R. C. Mitchell: How can we expect a balanced report if we do not set up a balanced Committee? Is it not the responsibility of the House to ensure that any future Committee is far more balanced than this was?

Mr. Hattersley: It is not for me to comment on the composition of Committees, although it is my duty to comment on their conclusions.

Mr. Aitken: In view of the Minister's sanctimonious comments on how the report was leaked on the early morning


radio, may I ask whether he is aware that his statement to the House a few moments ago was leaked on the one o'clock news, only two hours ago? Can the Government ever get away from double standards?

Mr. Hattersley: I know that the hon. Gentleman is an authority on these matters, but today he has got it wrong. As is well known, some amorphous being known as a "spokesman" speaks on behalf of the Foreign Office each morning. By an extraordinary coincidence, he said something that was about the same as my answer, though not identical to it.

Iceland (Fisheries Dispute)

Mr. Luce: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the latest developments regarding the fisheries dispute with Iceland.

Mr. Crosland: Yes, Sir. As my right hon. Friend the Minister of Agriculture, Fisheries and Food told the House on 6th May, we were compelled, in the face of greatly increased harassment by the Icelandic coastguard, to raise the level of the forces protecting our trawlers fishing off Iceland. Her Majesty's Government continue to seek a negotiated settlement of the dispute and I intend to discuss this matter with my NATO colleagues at tomorrow's Council meeting of the Alliance in Oslo.

Mr. Luce: As the future of the fishing industry is being re-examined in the light of the Law of the Sea Conference and of the Common Market negotiations, and as Iceland has a critical rôle to play in terms of the NATO defence of the northern flank, will the Minister now seek a major diplomatic effort, with the help if necessary of the nations that are friendly to both sides in this dispute, to resolve this matter, which is mutually destructive?

Mr. Crosland: I agree that the dispute is mutually destructive. I accept what the hon. Gentleman said about the NATO northern flank and other points to which he alluded. In turn, I must allude to the crucial importance of this matter to the British fishing industry. I should like above anything else to achieve a settlement of this dispute in which there would be no victory and no defeat, but

in which both sides could come out with a reasonable and honourable settlement.

Mr. James Johnson: Is my right hon. Friend aware of how much all those in fishing ports, particularly workers in the deep sea fleet, welcome the fact that he is to visit Oslo tomorrow? Will he try to meet the Icelandic Minister who is his opposite number and even, with luck, Prime Minister Hallgrimsson? Secondly, there is talk in the fishing ports of the Icelanders having some offer to make. Can my right hon. Friend say what evidence there is for this idea circulating in Hull, Grimsby and elsewhere? Is there any substance in this story?

Mr. Crosland: I should be willing to meet the Icelandic Foreign Minister in Oslo at any time during the conference. No doubt there are reports circulating in the fishing ports, but I prefer not to comment on that now.

Mr. Wall: Does the right hon. Gentleman agree that fishery protection vessels are permitting catches up to voluntarily agreed quotas of fish and that it is therefore futile from the points of view of both Iceland and this country to continue the dispute? Will he do his best to end it as soon as possible?

Mr. Crosland: During the last week many trawlers have returned to the designated fishing area and fishing has been at a better rate than it was previously. Subject to one serious incident affecting the "Primella", the amount of harassment has been minimal. If we take the six months from November to May, which are not the best six months for fishing, we see that more fish was caught by British trawlers off Iceland than in the corresponding six months of the previous year.

Mr. McNamara: Is my right hon. Friend aware that we welcome his visit to Oslo, but we are concerned not only with a settlement of the dispute but with working out a proper fishing policy for this country so that we know what is to happen on investment, infrastructure, decasualisation and other matters? Is he aware that while we hope he will get a settlement with Iceland, he and other Ministers should be looking towards the long-term interests of the British fishing industry?

Mr. Crosland: I very strongly agree with my hon. Friend. It is quite wrong to look at the Icelandic dispute in isolation. It must be seen in the context of the many dramatic changes affecting the industry, and any settlement must be part of a Government statement on a total strategy for the future.

Mr. Crowder: How much money has been costed to the British taxpayer as a result of damage done to Her Majesty's ships in the course of the dispute?

Mr. Crosland: I should be obliged if the hon. and learned Member would put that question to the Secretary of State for Defence.

Oral Answers to Questions — EUROPEAN COMMUNITY

Foreign Ministers

Mr. Marten: asked the Secretary of State for Foreign and Commonwealth Affairs when he will next meet the EEC Foreign Ministers.

Mr. Moate: asked the Secretary of State for Foreign and Commonwealth Affairs when he next expects to meet other EEC Foreign Ministers.

Mr. Crosland: I met the other EEC Foreign Ministers at an informal meeting in Luxembourg last Friday and Saturday and expect to meet them again at the Council of Ministers in Brussels on 31st May and 1st June.

Mr. Marten: Are we allowed to know a little more about what was said at that meeting? Is the right hon. Gentleman aware that several news bulletins on Sunday said that among the items on the agenda was consideration of what steps Ministers could take to prevent the further disintegration of the Community? Was that so?

Mr. Crosland: No, that was not so. As I am rather new to my present post, I have to read my brief occasionally. I am instructed that the discussions in Luxembourg, like similar discussions with the Foreign Ministers of any country, are traditionally confidential.

Mr. Roy Hughes: Will my right hon. Friend draw the attention of the other Foreign Ministers when he next meets them to the vast quantities of EEC motor vehicles coming into this country? Is he

aware that they had over 22 per cent. penetration of the British market in the first three months of this year? Will he take steps to have this figure cut back, besides exhorting our own people to buy British in order to keep themselves in employment?

Mr. Crosland: That would be a very interesting matter to discuss. In another context I was discussing it in relation to Japanese motor vehicle exports when I was in Japan. I feel very strongly that, at the end of the day, there is only one solution to this problem and that is for the British motor industry to pull its socks up.

Mr. Moate: Will the Foreign Secretary be taking up with his colleagues in the EEC the question of Greek membership of the Community? Is it his policy to promote the earliest possible membership of Greece? Is he satisfied that there will be no dragging of feet by the Commission in this matter?

Mr. Crosland: It is certainly the British Government's policy to promote Greece's entry into the Community. This matter was not discussed in detail last week-end, but I have no doubt that it will be raised at the next Council of Ministers' meeting at the end of May or beginning of June.

Mr. Skinner: Will my right hon. Friend take up with the other Foreign Ministers the question of bribery and corruption between various multinational companies, Common Market countries and politicians in those countries? Is he aware that a Treasury Minister said yesterday that we could not go it alone in this matter? We were told that one of the reasons why we should join the Common Market was that there could be harmonisation. Why do we not have some harmonisation on this—

Mr. Speaker: Order. Let us have some harmonisation.

Mr. Crosland: As I have frequently said, I am against harmonisation for harmonisation's sake. I was not aware that a Treasury Minister gave my hon. Friend a reply yesterday, but I am absolutely sure that it was wise, discreet and generally statesmanlike.

Mrs. Winifred Ewing: May I ask the Foreign Secretary a very simple question?


When he next meets his EEC colleagues, will he discuss the impossible idea that a 12-mile limit would do for the inshore fishing industry in Great Britain?

Mr. Crosland: The hon. Lady need not lecture me on the fishing industry. If there is one European subject I do understand it is the importance of an agreement on a common fisheries policy. I shall certainly bear in mind and underline the hon. Lady's remarks, with which I strongly agree.

Mr. William Hamilton: Following the meeting in Luxembourg last week there were optimistic reports in the Press about the possibility of meeting the target date for direct elections. Can my right lion. Friend say whether there was any justification for those reports?

Mr. Crosland: The discussions were not so much concerned with the date and method of direct elections as with the constitution of the Parliament. We spent many hours discussing the constitution and, although there was not agreement, we narrowed down the range of options we thought were open to us. This is a critical and controversial matter and it still remains to be decided.

Mr. Hurd: asked Would the Foreign Secretary accept that one of the plans which seems to have been discussed and which would keep the existing size of the Parliament, and therefore the 36 seats for the United Kingdom, would be very hard for this House to accept? Is he aware that such a plan would make it almost impossible to secure fair representation for the different parts of the United Kingdom?

Mr. Crosland: I am extremely conscious of that fact.

Mr. McNamara: asked In his discussions last week, did my right hon. Friend have time to pause and comment on the statement of M. Lardinois about the impossibility of getting a common fisheries policy and the difficulty of getting any sort of agreement through the national Parliaments? Did he therefore tell his colleagues that, if we cannot have a sensible policy to protect our industry, the Government will have to take unilateral action to ensure that the interests of our fishermen are properly protected?

Mr. Crosland: I would never say anything as provocative as my hon. Friend suggested, but I dropped a number of hints suggesting that, as far as I was concerned, the common fisheries policy had an exceptionally high priority.

Regulations, Directions and Decisions

Mr. Jay: asked the Secretary of State for Foreign and Commonwealth Affairs how many regulations, directives and decisions have been adopted by the EEC Council of Ministers and Commission, respectively, in 1976 to date.

Mr. Hattersley: The Official Journal of the European Communities lists all such items. In 1976, up to and including Official Journal Number L113 of 30th April, the Council has adopted 115 regulations, 18 directives and 30 decisions; and the Commission has adopted 876 regulations, five directives and 862 decisions.

Mr. Jay: Does my right hon. Friend think it is a reputable form of legislation that hundreds of Orders should be imposed on this country without the House having the opportunity even to discuss and take decisions on them, as we can with our own Statutory Instruments?

Mr. Hattersley: Many of the decisions I have described would not be regarded as legislation if they were taken by national Governments. They are administrative acts, mainly concerned with regulating the agricultural market in a minute, day-to-day way. I understand my right hon. Friend's feeling that this is unsatisfactory, but I am sure that he will agree that we live in an unsatisfactory parliamentary world. I have discovered that in the same period 666 Statutory Instruments were approved by this House and we debated only 36 of them.

Mr. Ronald Atkins: asked How many of these directives and regulations were concerned with the control of imports? Would the same generosity be shown to Great Britain as has been shown to Italy, which has introduced what amounts to import controls?

Mr. Hattersley: asked There is no question but that, if the United Kingdom economy were in the same condition as that of Italy and we made application under the


same article of the Treaty as did Italy, we should receive the same sort of sympathy from our colleagues in the Community. I cannot tell my hon. Friend offhand how many of the decisions were related to import controls, although some specific items were so related, including one concerning the import of frozen fish. That was made lawful a few weeks ago in order to help our industry, and the Commission is aware of it.

Mr. Marten: On the question of the Commissioners working in the Commission and putting forward all these regulations, what is the present constitutional position of Mr. Spinelli, who is a candidate on the Communist slate and a Commissioner? Is he still allowed to work in the Commission as a declared member of the Communist slate?

Mr. Hattersley: I need notice of that question.

Mr. Heffer: Does my right hon. Friend agree that one of the problems in relation to the Common Market is that certain member Governments bend the rules, and that sometimes we are put at a disadvantage because we play the game of cricket? Is it not time that we began an examination of precisely how they bend the rules and how that affects us in this country?

Mr. Hattersley: I did not think that playing or watching the game of cricket was a disadvantage, but I must tell my hon. Friend that I have some sympathy with his view. It is not only in the EEC that it is the habit of the British Government to adhere strictly to the letter and terms of laws and conventions. That puts us at a disadvantage compared with some other countries, which I shall not name and which feel more relaxed about their international obligations. I believe, however, that it is in the interests of our reputation in the world as a whole that we continue to accept the letter and spirit of the treaties into which we have entered. I am sure that that is what we must continue to do.

Tindemans Report

Mr. Gould: asked the Secretary of State for Foreign and Commonwealth Affairs whether he has yet reached any conclusions on the Tindemans Report.

Mr. Spearing: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on Her Majesty's Government's reactions to the proposals contained in the Tindemans Report.

Mr. Crosland: The Government have not yet reached any final conclusions on the proposals in the Tindemans Report. Generally, however, we regard it as a constructive basis for discussion of the future of the Community, even though we can by no means accept everything in it. We shall of course wish to take full account of the views of the House in formulating our position.

Mr. Gould: Does my right hon. Friend agree that we and our Common Market partners would do better to concentrate our efforts on putting right those things which have been going wrong in the common agricultural policy and elsewhere rather than trying to impose a federal superstructure on what are increasingly shaky foundations?

Mr. Crosland: If I thought that that was being proposed, I should strongly agree with my hon. Friend. However, to be fair to Mr. Tindemans, to whom I have now talked twice in the past five days, he makes it clear at the beginning of his report—this is just one reason why it is a good report, if I may say so—that he sees no purpose in pursuing at this stage the argument between the federalists and the anti-federalists. Therefore, the whole premise of the report is that that argument, for the moment, is futile and that the only sensible thing to do is to build on the institutions that we have and to try to make them work better.

Mr. John Davies: The right hon. Gentleman will be aware that his predecessor, who is now Prime Minister, gave an undertaking some time ago that the House would have the opportunity of debating the Tindemans Report. Will he assure the House that before it does so the Government will table a document, be it a White Paper or whatever, which sets out their view on the Tindemans Report, so that we may debate not merely the report but the Government's positive response to it?

Mr. Crosland: That is a very interesting suggestion which I shall consider very


seriously. Obviously, I cannot give a commitment this afternoon.

Mr. Spearing: My right hon. Friend has reminded the House that the report's foreword regards the federalist and non-federalist argument as sterile. Does he agree that the whole tone and aspirations of the Tindemans Report are distinctly federalist? Does he agree with what was said by the Prime Minister when he was Foreign Secretary in a speech at the Ubersee Club in Hamburg—namely, that we need to emphasise the truly international nature of the Community, not its supranational characteristic, which is causing all the problems at the moment?

Mr. Crosland: asked I cannot accept the first part of my hon. Friend's question, which, with respect to him, would not stand up to a careful reading of the report. However, I strongly agree with what he said in the second part. I think that he would find that Mr. Tindemans would go far in agreeing with him on that.

Mr. Tugendhat: Does the right hon. Gentleman recall that the Tindemans Report specifically mentions the desirability of a concerted or common European response to some of the problems of the Third World and some of the demands made by it, for instance, at UNCTAD IV? Does he agree that the total diversity and lack of unity in the response of the European Community countries at UNCTAD is a disadvantage to us all and emphasises the need for progress in this area?

Mr. Crosland: It is early to comment on what the final outcome of UNCTAD IV will be, though I agree that there have been some depressing signs. However, on the hon. Gentleman's major point, I made it clear to Mr. Tindemans that the United Kingdom Government strongly agreed with his proposition that one of the four priority areas for political cooperation—co-operation in foreign policy —should be North-South relations, or relations between the richer countries and the developing world.

Mr. Blaker: The right hon. Gentleman will recall that on the last occasion that he answered Questions in the House he expressed his support for the view that one of the most important things that the Commission could do would be to

concert its foreign policy. That is one of the most important features of the Tindemans Report. Will he give us an assurance that pending his statement on the Government's definitive views on the report, he is personally paying attention to some of the important foreign policy problems that are faced by Europe, such as Yugoslavia and Spain, and encouraging the Community to take a concerted view towards these problems?

Mr. Crosland: Yes, I think that I can give that assurance in general terms—[Interruption.] I say "in general terms" for a perfectly practical reason that the hon. Gentleman will understand, he having been in the Foreign Office. At the moment my Department appears to allow me virtually no time in this country. The amount of time for thinking in serious depth about problems is somewhat limited, but subject to that, yes, I can give the hon. Gentleman the assurance that he seeks.

Direct Elections

Mr. Dykes: asked the Secretary of State for Foreign and Commonwealth Affairs what progress has been made by the Council of Ministers on preparations for direct elections to the European Parliament prior to the next European Council meeting.

Mr. Hattersley: Foreign Ministers discussed direct elections at the Council of Ministers meeting on 3rd and 4th May and at their informal meeting in Luxembourg on 14th and 15th May. These discussions have been useful in clarifying the different positions of member States but have not yet led to agreement on outstanding points.

Mr. Dykes: How confident is the Minister that the July summit will conclude all the principal decisions on this subject?

Mr. Hattersley: I cannot be confident about that, but I hope that colleagues in the Community will understand the needs of a variety of interests and will come to some conclusion which is acceptable to all members. I am also confident that the House of Commons will want to move with the Government side by side, and will give its advice in sufficient time to enable us to incorporate its wishes into our eventual position.

Mr. Fernyhough: Does my right hon. Friend recall that, when the EEC legislation was going through the House, we were assured that the Government would always have the right to veto any proposal with which they did not agree? Will my right hon. Friend assure us that on this issue the Government will not be weak-kneed, and that if they cannot get what they have told the House they would like they will exercise the veto that we were told they would not hesitate to use?

Mr. Hattersley: There is no question but that what has been called the veto still exists for essential national interests and that it will be preserved. My right hon. Friend may rest assured that the Government have a lively appreciation of what is necessary for British interests in these matters and will not be budged by advocacy from that position.

Mr. Goodhew: As the Government have already said that they cannot—despite our long history of democratic elections—agree to some form of direct elections to the European Parliament by 1978, how is it that the same Government are urging Mr. Smith to organise majority rule in two years?

Mr. Hattersley: The second part of the question is irrelevant. The first part is a diametrically wrong statement of the Government's position.

Mr. MacFarquhar: Does my right hon. Friend agree that the best course for right hon. and hon. Members who are worried about the stream of directives and other matters from the Commission is to put their backs behind the drive to get direct elections for a directly-elected European Parliament?

Mr. Hattersley: asked I am sure that that is right. I am sure that the numbers which I have quoted today will not be quoted on a future occasion when a Parliament is directly elected. However, two provisos must follow. First, the new Parliament would not have powers in excess of what the present Parliament possesses. Therefore, a good deal of work would remain in present institutions. In fact, much of the work that I described in answer to an earlier Question is not legislation but administration. We would not expect to weary the Parliament with that.

Mr. Marten: Does not the supplementary question of the hon. Member for Belper (Mr. MacFarquhar) reveal his federal intentions in the ultimate? Will the right hon. Gentleman say how many options are being discussed about the numbers to go to the directly-elected European Assembly, which countries are saying what and who is objecting to what? Are we to know about those matters?

Mr. Hattersley: I cannot say whether my hon. Friend's question revealed his enthusiasm for greater powers for the European Parliament, but my answer revealed that the Government do not share any such enthusiasm. I hope that the hon. Gentleman will be comforted by that reply.
It would be impossible for us at this stage to list specific numbers, as advocated by specific Governments. Our object is to get a size and shape for the European Parliament which is not only acceptable to all our colleagues but meets Britain's needs. I am not sure that that result can best be achieved by our calling the odds from different nations' points of view.

Mr. Heffer: Does my right hon. Friend agree that the widest possible consultation should take place? Is he aware that the Labour Party has not yet decided on its attitude towards direct elections? The matter will have to come before the Labour Party conference. Will he therefore assure the House that the views of the Labour Party conference will be taken into the fullest consideration prior to any firm commitment one way or the other on the part of the Government?

Mr. Hattersley: asked My right hon. Friend the Prime Minister has already explained that we are most anxious to take advice from all parties. Naturally, those of us who have long-standing membership of the Labour Party are particularly enthusiastic to hear the Labour Party's views. A number of letters have gone to my hon. Friend and his colleagues on the National Executive asking for their opinions. We shall do our best to take those opinions within the proper time scale. However, my hon. Friend will understand that, as the Prime Minister said, the programme of the European Community requires us to act swiftly in the national interest. I am sure that that is what the Labour Party would expect us to do.

LOCAL GOVERNMENT FINANCE (LAYFIELD REPORT)

The Secretary of State for the Environment (Mr. Peter Shore): With permission, Mr. Speaker, I wish to make a statement. The Report of the Committee of Inquiry into Local Government Finance— the Layfield Committee—is published this afternoon. Copies are available in the Vote Office.
The committee was appointed in the summer of 1974 by my predecessor together with my right hon. Friends the Secretary of State for Wales and the then Secretary of State for Scotland. Its terms of reference were
to review the whole system of local government finance in England, Scotland and Wales, and to make recommendations".
The committee presented its report in March of this year.
This is, as the committee points out, the first comprehensive review of local government finance since 1914. It was, therefore, bound to be a major undertaking, and we are grateful to Mr. Frank Layfield, QC, and his colleagues on the committee for completing their work within 21 months of their first meeting. This is a tribute to the intensive work put in by the members of the committee.
The report itself runs to nearly 500 pages, and I will not attempt to summarise it in a short statement. Nor will the House expect me to announce today any decisions on the committee's recommendations. The Government will want, first, to hear the views of local government, of other interested parties, and, of course, of both Houses. Secondly, the committee has provided not a single clear-cut list of recommendations but a fundamental analysis of the present state of local government finance. It concludes that the design of a system of local finance must depend on the view taken about what the whole relationship between central and local government should be. Thirdly, as the committee acknowledges,
The detailed implications of our recommendations would require very much more time to explore than was available to us.
To take one conspicuous example, the proposal for a local income tax is indeed complex. The report recommends that if much greater freedom of action were

to be given to local authorities, a local income tax should be introduced so as to reduce their dependence on Government grants. I must stress that the committee envisaged local income tax as a supplement to the rates and not as a substitute for the rates. This proposal obviously requires very careful consideration.
We propose to press ahead urgently with our consultations and studies. My right hon. Friends and I will be discussing the report with the Consultative Councils on Local Government Finance and with the Convention of Scottish Local Authorities. Naturally, we could not write to all the vast number of other parties with an interest in local government finance. But we are anxious to obtain the widest possible knowledge of public and professional opinion. I would therefore urge any interested organisations or individuals—including, of course, right hon. and hon. Members—to send us their comments.
I fully appreciate how complex are the issues raised in the report of the Layfield Committee and that local authority associations and others are already occupied with preparing comments on other important documents, including the Transport Policy Review. Nevertheless, we should press on urgently with the consideration of the Layfield Report and I think that interested parties ought to be able to come to a view on the issues raised within the next six months. So I must ask that comments be submitted by the end of November.
Progress thereafter will depend on the outcome of our consultations, but we shall aim to come to decisions and to report to the House as soon as possible.

Mr. Raison: Is the Secretary of State aware that hon. Members are in their usual difficulty of being expected to ask questions about a report which none of us has seen? Is he also aware that we shall need to see the full evidence before coming to a view? Will he confirm that what is published today does not include the full evidence? Will he also tell us when the full evidence will be published?
I am sure that the House will wish to join the Secretary of State in expressing thanks to Mr. Layfield and his committee, because there is no question but that they have worked extremely hard over


these last few months. We should like to record our appreciation.
The right hon. Gentleman said that he wanted to hear the views of the House. That is quite right. Will he give us some indication of when he expects a debate to take place on the Layfield Report?
Is the right hon. Gentleman aware that we shall look very closely to see whether the report in any way meets our deep-rooted objections to the present rating system? Is he also aware that, on the face of it, we have serious doubts about the cost of administering a local income tax.
Finally, we note the Secretary of State's comment that the period of consultation is to last until the end of November. Will he confirm that, therefore, there will be no possibility of legislation before 1977–78 at the earliest?

Mr. Shore: I think that I can help the hon. Gentleman in replying to a number of his questions. I must warn the House that the full evidence runs to about 5 million words, but I am informed that what we assume to be the most interesting part of the evidence can be published in about six or seven volumes and that we hope to have them ready by the autumn.
I know that my right hon. Friend the Leader of the House is always sensitive to the wishes of the House regarding debates. I am sure that what has been said will be drawn to his attention. I think that the House would agree with me that a debate would be extremely welcome and useful as soon as we have all had time to consider, as we must, this large and complex report.
The hon. Gentleman referred to the Opposition's objections to the existing rating system. I have heard that the Conservative Party has objections to the rating system. I have also heard many of my hon. Friends object to it. But I must stress that the Layfield Committee does not propose that the rating system —there may be modifications—should or could be abolished.
Finally, I think that the November deadline is reasonable. We shall hope to have a number of comments by that time which should enable us to come to conclusions and to be ready for legislation in the following Session.

Mr. Blenkinsop: Is my right hon. Friend aware that there is strong feeling on both sides of the House that there should be a relatively early debate on this subject when the House reassembles after the brief Spring Recess? Is he further aware that some of us, at any rate, believe that there is a link between the Layfield Committee's proposals and devolution questions and that it is essential that we should have a statement on the Government's views on devolution so far as that affects England, as well as other parts of Great Britain.

Mr. Shore: I understand my hon. Friend's concern that we should have proposals as soon as may be on the question of devolution as it may affect England, and of course, there could well be connections between the Layfield recommendations and any proposals that were finally agreed on the question of devolution. I am afraid that I have nothing to add to what I have already said about a debate.

Mr. Penhaligon: Does the Minister agree that it is quite incredible that a review of local government finance should take place after local government reorganisation? Does he agree that more logic would have ensued if the subjects had been approached the other way around?

Mr. Shore: I think that I can afford to take a rather relaxed view in reply to that question. There is a certain logic in what the hon. Gentleman says. I certainly was not Secretary of State for the Environment at the time. However, probably in an ideal world the two matters might have been considered together.

Mr. Mellish: I want to raise something that is not a party political point. My right hon. Friend will know that one of the great anomalies in local government finance, particularly on the housebuilding side, is that from the moment that his Department gives loan sanction, the debt starts—from that moment—although probably that for which the loan sanction has been given does not bring in a single penny of revenue for 18 months or two years or more. This is a very long-running sore. Does Layfield make any recommendation about that, and if so, what?

Mr. Shore: I regret that there does not spring immediately to my mind a particular reference to that matter. However, I would assume that there will be parts of the committee's general assessment of the implications of the present way in which local government finance works which would be relevant to housing, and although the fact of a housing policy review was something of which it took account, it did not specifically deal with housing questions.

Mr. Gwynfor Evans: Will the right hon. Gentleman confirm that on pages 166 and 167 of the report there is reference to the possibility of rating agricultural land? Is he aware that that will be totally unacceptable to farmers, in that it will add so much to their costs, and totally unacceptable to housewives, in that it will add to the cost of food in the shops?

Mr. Shore: The House will have heard what the hon. Gentleman said. The House will also now know that among the many recommendations of Layfield is a recommendation that the derating of agricultural land should cease. But this is one of the matters which the House and others will need to consider and discuss.

Mr. MacCormick: Does the Minister appreciate how monstrous it would be to increase the complexity of local government in Scotland by, for example, introducing a local income tax, however desirable that might be in the long run, before the present two-tier system of local government in Scotland is changed and we get rid of the top-heavy regional system?

Mr. Shore: The structure of local government in Scotland and in England and Wales is, in a sense, a separate matter. However, I think that the point on which we all have to clear our minds is whether the line of argument that leads the Layfield Committee, on balance, to say that it is in favour of a local income tax is a line of argument that commends itself to the House.

Mr. MacFarquhar: Is my right hon. Friend aware—even without reading all the 5 million words of evidence—that dissatisfaction with the present system of local government finance is widespread but that any decision to preserve the rating system and to add on top of that

a local income tax would be greeted with widespread dismay by all?

Mr. Shore: My hon. Friend's understanding of the recommendations of the Layfield Report is broadly correct. As I emphasised in my statement, the Layfield Committee does not see local income tax as a substitute for rates—certainly not in any substantial part. Therefore, the fact that it is recommending a local income tax as a supplement to the rates is a fact that undoubtedly my hon. Friend and others will take into account.

Mr. Fry: Will the right hon. Gentleman confirm that he is fully aware that the main reason for public grievance about the present rating system is that it bears little relation to ability to pay? Will he give an assurance to the House that the Government take cognisance of that fact and will bring forward proposals that are much more equitable in relation to a person's income?

Mr. Shore: The House will want to study the report, but among the committee's proposals for changing the existing rating system is a proposal to change the basis on which the rates are levied so that it would take account not merely of property values in the areas upon which the rates are levied but of the income of the people in the areas concerned.

Mr. Ward: Will my right hon. Friend confirm that the report completely rejects any suggestion that the total cost of education should be transferred to the Exchequer?

Mr. Shore: Yes. The committee does not find anything to recommend itself in that proposal. That is something that will be thought about very carefully on the Opposition side of the House.

Mr. Michael Morris: As the report is already nearly five months late and as the Secretary of State has said that there will be another six months of consultation, is he saying to ratepayers up and down the country that there will be no help for them at all for at least another two years?

Mr. Shore: I am glad to say that most ratepayers are, on the whole, feeling less bruised, as it were, by the rate levels which were announced this April than


they were by the very severe rate increases which they experienced in the preceding three years. However, it is impossible to think of any major changes being agreed and introduced before the next rating year.

Several Hon. Members: rose�ž

Mr. Speaker: There are to be two other statements. We cannot debate this subject now.

MR. PATRICK MEEHAN

The Secretary of State for Scotland (Mr. Bruce Millan): As the House knows, I have been considering the case of Patrick Meehan.
Patrick Meehan was charged with the murder of Mrs. Abraham Ross at Ayr, and on 24th October 1969, in the High Court of Justiciary in Edinburgh, was convicted of the murder and sentenced to life imprisonment. He appealed against his conviction to the Court of Criminal Appeal, and, after a hearing, his appeal was dismissed on 25th November 1969.
Since that time there have been representations regarding the conviction to successive Secretaries of State for Scotland based on the case against Mr. Meehan at the trial, but also on other matters, including statements by another man alleging his participation in the robbery.
In the last few days I have received new information following the death of William McGuiness, a man with a record of crimes of dishonesty and violence. It was revealed after his death that he had made statements to the effect that he had participated in the Ross robbery to the exclusion of Mr. Meehan. The value of these statements must remain a matter of judgment, but there is independent evidence establishing that McGuiness was in Ayr on the night of the murder.
I have considered whether the case might again be brought under judicial review. The only provision of law by which a conviction, once reached and appealed against, can be restored to the judicial field is my power to refer a case back under Section 263(1)(a) of the Criminal Procedure (Scotland) Act 1975. However, by statute the court could not go wider in considering the case than it can in an ordinary appeal against con-

viction, and, having regard to the nature of the considerations relevant to a decision on the case, I have reached the conclusion that my powers of reference back are inappropriate to it. Nor would further investigation or inquiry be likely to lead to the discovery of such further information as to make such a reference appropriate.
In the circumstances I have reached the conclusion that it falls to me as Secretary of State to reach a decision on whether or not to recommend the exercise of the Royal Prerogative. The new information which has become available since the death of McGuiness, taken along with the earlier considerations relevant to the case, has convinced me that it would be wrong for Patrick Meehan to remain in prison convicted of murder. I have therefore decided to recommend the exercise of the Royal Prerogative to grant a free pardon. Mr. Meehan is being released today.
My right hon. and learned Friend the Lord Advocate is at present considering, in the light of the new evidence, whether he should instruct any further investigations with a view to possible criminal proceedings.

Mr. Buchanan-Smith: May I say how much I appreciate that the decision that the right hon. Gentleman has announced cannot have been an easy one and must have involved him in a great deal of thought and consideration? Will he confirm that the new evidence that he describes in his statement, which was not available when this case was considered on previous occasions, is available now only because the solicitor concerned is no longer bound by the confidentiality rule? Does this not raise very much wider questions, and might it not be appropriate that the matter of solicitors' confidentiality should be referred to the Royal Commission on the Legal Profession? Secondly, would the right hon. Gentleman say whether the police have been involved in the recent investigations and confirm that they have co-operated fully in bringing this new evidence to light?

Mr. Millan: I can confirm that the new information, which I received only recently, is important and has weighed very heavily in the decision I have taken. Solicitors' confidentiality raises many


extremely difficult questions and is, I think, in the first instance, a matter for the Law Society of Scotland. As far as I am aware, it would be relevant for the Royal Commission to consider that matter, but if there were thought to be some benefit to be gained from any discussions between my officials and the Law Society I would be happy to co-operate on that. I can confirm, on the second point, that we have had the utmost police co-operation in these further investigations.

Mr. Robert Hughes: Can I press my right hon. Friend further on the question of confidentiality? Since this question was first raised, there is now a clear example of a miscarriage of justice. Although I welcome the decision which my right hon. Friend has taken, is it not the case that previous Secretaries of State have been severely handicapped by lack of knowledge which was available in another quarter?

Mr. Millan: That may be so. I have said already that I have had additional information available to me which was not available to my predecessors. I have absolutely no doubt that my predecessors considered this case with great care and anxiety. However, on the question of confidentiality of information given to solicitors, an obvious point, for example, is whether the information would be made available to solicitors if there were no confidentiality rule. It is not a matter which is easy to decide.

Mr. Fairbairn: Does the House appreciate that this is a moment of great triumph for those who have been fighting for Meehan's release for seven years against the bland face of the Scottish Office and the Lord Advocate?

Mr. Robert Hughes: asked That is disgraceful.

Mr. Fairbairn: asked In a moment of victory, magnanimity is essential, but does the Secretary of State appreciate that this case raises a large number of important questions which can be answered only by a public inquiry as to why, for instance, evidence of paper from the safe of Mr. Ross was found in the pockets of a man who is now acknowledged to be innocent, or of his accomplice who is now acknowledged to be innocent, and how

the parade was falsified? Many other questions must now be answered, as to how, again and again, both the courts and the Secretaries of State have frustrated—

Hon. Members: asked Too long.

Mr. Mellish: On a point of order, Mr. Speaker. I have no interest in the matter, but as a Member of this House I aways thought that the Chair had strictly ruled on allegations, or imputations, being made here against individuals who are unable to defend themselves in a case of this kind. Other hon. Members have never been allowed to go this far. I ask you, is this not a case where you ought to stop it?

Mr. Speaker: I am much obliged to the right hon. Gentleman, but I have not yet heard an allegation against an individual—[Interruption.] Order. I think the House should remember that this is a time of some emotion for the people concerned, when a man is being released after being in jail all these years. The hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn), who represented him, has a right to address the House.

Mr. Fairbairn: Does the House appreciate that we must have an explanation how the Lord Advocate and those succeeding him took the right of their office to oppose bills of criminal letters which would have established the very facts which are now admitted in the name of the Secretary of State?

Mr. Millan: asked I do not think I can accept that point. The fact is there was a conviction and an appeal, and the appeal was turned down. Many of the matters raised subsequently were matters considered at the trial, as the hon. and learned Gentleman should know, since he was the defending counsel. All I can say on this matter, which is a very difficult one, is that it is a very responsible decision indeed to set aside a conviction in one of the High Courts of this land. Any Secretary of State would have to be very well persuaded of what he was doing before he would set aside a conviction and take the decision I have taken today.
As far as the question of an independent inquiry is concerned, if the hon. and learned Gentleman will look at the


statement I have made he will see that I finished by saying that my right hon. and learned Friend the Lord Advocate was making some further inquiries into certain aspects of this case. It would be, at the very least, premature to consider any question of an independent inquiry before these investigations have been completed.

Mr. William Ross: asked While not necessarily disagreeing with the final decision which my right hon. Friend reached, may I ask whether he appreciates that in this case there has been a confusion and a duplication of confessions, not all from unimpeachable sources, which makes this matter much more difficult? Bearing in mind the important implicit consequences of his decision for many people in Scotland, is he satisfied that this was the only action which was open to him? Will he publish the police report about which we have read, which he received, and will he make it clear that the original defending solicitor, Mr. Beltrami, had in his possession a confession not from the man who was accused in the defence of the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn)—that was his special defence, accusing somebody else —but from a third man whose confession is now being accepted?

Mr. Millan: So far as Waddell is concerned, that was a matter raised during the trial. I agree very much with my right hon. Friend that this is a case of very considerable complexity. All these matters must be extremely difficult, and this, for a whole host of reasons, is a particularly difficult one. I know that my right hon. Friend applied the very high standards of care and diligence to his consideration of this case that he applied to all other matters with which he dealt at the Scottish Office. I have come to a different conclusion from my right hon. Friend, but I have had certain additional information available to me which was not available to him. As I have said, that additional information has weighed very heavily with me.
My right hon. Friend asks whether the decision I have reached is the only decision I could reach. Of course, it is not the only decision—I could have taken other decisions—but it was the only decision I felt I could reasonably reach in the light of all the information available

to me. So far as the publication of the police reports is concerned, they are, in the nature of things, confidential documents. It would be very undesirable to breach the principle that these reports —which of course go not to me, but to the Crown Agent and the Lord Advocate—should not be published after the event even if in particular circumstances there is a lot of public interest and people may well feel that certain interests of justice would be served by publication. I do not think that I can take the view that these police reports should be published. But, as I have said, my right hon. and learned Friend the Lord Advocate is carrying out further investigations and it is certainly my intention that we should investigate this matter with very great rigour and thoroughness.

Mr. David Steel: Does not the Secretary of State accept that, when he makes a statement of this gravity, it is bound to cause some dent in confidence in the administration of justice in Scotland and that his overriding duty must be to restore that confidence? For that reason, why does he refuse to have some independent public inquiry into the nature of the police evidence? When accusations have been made about the conduct of the Lord Advocate's own Department in the case, an inquiry by the Lord Advocate himself is clearly not sufficient.

Mr. Millan: I did not rule out the possibility of an independent inquiry. What I said was that it would be inappropriate even to take a view on that matter at the moment, when further investigations which are being carried out may lead to prosecution. It would be inappropriate in those circumstances for me to take a view about an inquiry. But I am well aware, in making this decision, that there are many loose ends remaining. Some of them have been pointed out in the House and will no doubt be pointed out elsewhere, but I had to decide whether Patrick Meehan should remain in prison or get a free pardon. I felt that in all the circumstances the decision which I reached was the only decision I could reach.

Mr. Buchan: I, too, congratulate the Secretary of State on taking this decision. I have called for an inquiry but I believe that the course that he has chosen is correct and just in the situa-


tion. Although he must, as I do, reject the allegations of the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn), which amounted almost to prejudging the very inquiry we seek, will the points mentioned in relation to the evidence be matters which will be under inquiry both in relation to a possible criminal prosecution and in a wider context?

Mr. Millan: With the possibility of criminal proceedings being involved, the matters which may be subject to inquiry are specifically matters for my right hon. and learned Friend the Lord Advocate and not for me. However, I can say that all aspects of these matters, including some which immediately come to mind, will certainly be investigated, so far as they can be investigated at this date. I know that my right hon. and learned Friend will not mind my saying that he certainly intends to see that all relevant matters are thoroughly investigated.

Mrs. Winifred Ewing: May I, on behalf of the Glasgow Bar Association, of which I am a former president, congratulate the Secretary of State on what cannot have been an easy decision to make? May I also say that I once represented Meehan—one of many solicitors—and that one can understand why he was impatient of the law, in view of his experiences? Can any statement be made about compensation, and will there be a special look at the rate of compensation for the period during which it has been clear that a free pardon had to be granted? Would the Secretary of State agree that, no matter how we dress it up, this case is a blot on the fair name of Scottish criminal justice, which is known to be one of the best systems in the world? Is this not one of the worst incidents since the case of Oscar Slater, and therefore would it not be wise to be as open as possible from now on? May also say—

Hon. Members: Too long.

Mr. Speaker: Order. Would the hon. Lady come to a conclusion now?

Mrs. Ewing: Is it not regrettable that a statement of such importance has not been couched in apologetic terms, since we are talking about seven years of a man's life?

Mr. Millan: I hope that, among other things, I have approached this problem with sympathy as well as with a desire to see that justice is done. Of course I want to be as open as possible in this matter, but I hope that the House will accept that there are certain inhibitions at this time. I would not use the expression that the hon. Lady used, about this case being a "blot" on the Scottish legal system. It is a system of which we are all proud, but no system can be absolutely 100 per cent. perfect all the time. This is a difficult and complex matter. I certainly would not use this case as any reason for an attack on the Scottish legal system. That would be grossly unfair. Compensation would he a matter for an ex gratia payment rather than a statutory payment. No doubt that matter will be raised. and, in accordance with precedent, I will take independent advice.

Several Hon. Members: rose�ž

Mr. Speaker: I will allow two more questions before the next statement.

Mr. English: May I reinforce my right hon. Friend's gentle suggestion that the hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) is wrong about confidentiality? What sane man would be likely to confess to a murder save to a person who is not allowed to give that confession as evidence in court? It is very important to preserve confidentiality between lawyer and client—which in this case has caused a man to be released.

Mr. Millan: I do not think that I want to comment any more on this, but I think that the solicitor himself may well take the view that, if it had not been for the convention of confidentiality, it is doubtful whether the information given to him would in fact have been given to him. But these are difficult matters and I do not think that we should make snap judgments about them.

Mr. Younger: As there is intense public interest in this case, would the right hon. Gentleman please take the greatest care to ensure that the maximum fairness and impartiality is achieved, particularly with reference to the conduct of the police in this case? Since they do a very difficult and dangerous task in many ways


for the benefit of the public, will the right hon. Gentleman ensure that they are not the subject of a witch hunt in this case?

Mr. Millan: I have paid tribute a number of times to the Scottish police force and I am happy to do so again. At the same time, so far as any of these matters involve policemen they will be investigated with the same rigour and thoroughness as if they involved ordinary citizens.

Mr. Hooson: On a point of order, Mr. Speaker, one appreciates the deep concern of the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) on this matter and the great fight that he has waged for years for his client, but has it not always been a convention of the House that an advocate does not personally raise or discuss in this House any matter which concerns a case in which he has been directly involved? I appreciate that you allowed the question and that the hon. and learned Member has raised it previously, but does it not set a dangerous precedent in other completely different cases? Should not this matter be considered a little more by yourself and the appropriate Committee to see whether a rule could not be introduced?

Mr. Speaker: I am obliged to the hon. and learned Member. As the House has seen, I have just had the "good book" given to me. It says:
it is contrary to the usage and derogatory to the dignity of this House that any of its Members should bring forward, promote, or advocate in this House any proceeding or measure in which he may have acted or been concerned for or in consideration of any pecuniary fee or reward,".
I will obviously look at the matter. What is said, is said.

Mr. Maxwell-Hyslop: Further to the point of order, Mr. Speaker. May I submit to you that there is another side to this matter—that as long as it is known to the House that one of its Members has acted on behalf of the person concerned, the House itself may derive advantage from having points put to it of which only that Member is aware? There is a balance of advantage possibly to the House in having points put to it which could not otherwise be put to it than by the one Member to

whom they are known. That should also be borne in mind in the interests of the House.

Mr. Speaker: I am much obliged to the hon. Gentleman. I dislike giving off-the-cuff rulings on important questions such as this. If the House will allow me, I shall make a considered statement tomorrow.

EUROPEAN COMMUNITY (COUNCIL OF AGRICULTURE MINISTERS' MEETING)

The Minister of Agriculture, Fisheries and Food (Mr. Fred Peart): The Council of Ministers (Agriculture) met in Brussels on 17th–18th May. It is right that I should make a short statement to the House on what happened.
We had a further discussion of the quantities of New Zealand butter to be imported into the United Kingdom during the years 1978 to 1980 under Protocol 18 and in conformity with the Dublin Declaration. Some member countries saw difficulty in guaranteeing access for fixed quantities without providing for review in the event of a decline in the total size of the United Kingdom butter market.
In an attempt to meet this concern, while still affording New Zealand a firm guarantee of access for fixed quantities, the Commission put forward a new proposal during the meeting. This would give New Zealand a firm assurance that fixed quantities of her butter would find a market here, but it would provide for part of these quantities to be sold for the manufacture of other foods rather than for retail distribution if our retail market declined in size.
I neither accepted nor rejected this proposal in principle. It was clearly necessary to have the details and consider them with New Zealand before any decision could be taken. The Commission will provide full details of its new proposal as soon as possible, and the Council will seek to reach final decisions at its meeting on 21st–22nd June.
The Council dealt with four other matters of particular interest to this country. First, it heard a report from Mr. Lardinois of the progress of the Commission's discussions with ACP sugar producers on the guaranteed price for the coming sugar year. These are to be


resumed in the near future, and it is my belief that agreement can be reached on terms that are fair to the ACP countries and to our own refiners and consumers.
Secondly, it was agreed to allow Botswana to send an additional 1,500 tons of beef to the Community under the ACP arrangements before 30th June, so as to meet difficulties presented by the seasonality of her production.
Thirdly, it was agreed to try to adopt before August interim measures for the improvement of intra-Community trade in sheepmeat.
Finally, it was decided to extend the present suspension of the common customs tariff on new potatoes until 31st May, when the supply situation on this market should have improved.

Mr. Jopling: I thank the Minister for his statement. Is he aware of the highly unsatisfactory debate in the House on butter on Monday night? Leaving aside whether any blame is due either to his Department or to the Commission, will the right lion. Gentleman himself take steps to improve communications so that this intolerable situation does not occur again?
Is the Minister aware that we welcome his efforts to secure a fair deal with New Zealand for butter, in accordance with the arrangements made by the previous Government under Protocol 18 and the Labour Government's Dublin Declaration? Will the right hon. Gentleman assure the House that nothing has recently happened to make him feel that the spirit of those agreements cannot be put into practice in the future, and that the reported delaying tactics by some of his colleagues on the Council are a matter of manoeuvre rather than principle?
Is the Minister aware that we support his efforts to get a fair deal on sugar for the ACP countries and United Kingdom interests? We also support the decision to continue the suspension of the tariff on new potatoes, which we hope will help to bring down the price of potatoes.
Does not the Minister on reflection feel that it might be wiser to go more slowly in establishing a sheepmeat régime as the common agricultural policy is finding it difficult enough to meet its present commitments? Is this not a bad time to

establish that régime in view of its implication of higher lamb prices for the housewife and the danger of falling demand which will affect domestic producers?

Mr. Peart: On the question of links and discussions about what is happening in the Community, the hon. Gentleman knows, and the Chairman of the Scrutiny Committee will confirm, that I have always been willing to appear before the Scrutiny Committee with my officials, and I have always taken the view that we should inform the House about what is happening. If the hon. Gentleman has any positive suggestions to make for improving communications, I shall listen to him.
I should have thought that the Opposition, who I thought were rather soft regarding New Zealand during their negotiations, would welcome what I have done.

Mr. Marten: Rubbish.

Mr. Peart: It is no good saying "Rubbish". I have had many discussions with the new Zealand Government, and I have always been a great defender of New Zealand. Some people think that I am half Kiwi. I shall do all I can to defend New Zealand. I have been in close contact with the New Zealand Government throughout the discussions. Yesterday the New Zealand Ambassador was in Brussels and I had consultations with him. I assured the New Zealand Prime Minister that we would do all we could, and New Zealand appreciates the action that we have taken. No commitment has been made, and we shall discuss details later.
We have secured a fair deal on sugar. We got that at the Lomé Convention. The present talks are still in progress. There was not, as some people suggested, a breakdown in the talks; they were only postponed. [Interruption.] The hon. Member for Banbury (Mr. Marten), who snorted strangely, must realise that talks are postponed from time to time. The talks are going on. I hope that hon. Members will be sensible about this. We want a fair deal for the Lomé Convention countries and for our refiners and consumers.
I am glad that the extension of the suspension of the tariff on new potatoes is welcomed.
I agree with what the hon. Gentleman said about the sheepmeat regime. Our position is well known. We shall not agree to any Community arrangements which do not meet the interests of our consumers and producers. I give the hon. Gentleman that assurance.

Mr. Torney: I thank my right hon. Friend for his valiant defence of New Zealand butter, but is not British butter now being placed into intervention? If it is, will my right hon. Friend say how much is being placed into intervention? Would it not be far more sensible to use our home-produced butter rather than spend our vital foreign currency on importing Continental butter? If there is a fall in the consumption of the butter in this country, is it not because the Common Market policy forces up the price? if the Common Market gets its disorganised hands on the sheep market, can we look forward to great sheep mountains just as we have experienced and are experiencing beef mountains?

Mr. Peart: There are people in this country who say that we should not import even New Zealand butter. My hon. Friend is wrong to raise the issue of the common agricultural policy when we are talking about New Zealand. It is recognised that we have traditional links with New Zealand, and I do not want to jeopardise the negotiations. I know that my hon. Friend has a certain point of view on the CAP, and we can argue about that, but please let us not fight battles which have been lost. We are in the Community and we have to make the best of the Community.

Mr. Powell: In view of the fact that the Commission document which was initially before the Council did not contain the proposed quotas but was blank, and in view of the fact that the further document from the Commission is still in need of some details, as the right hon. Gentleman said in his statement, is he of the opinion that the proposals from the Commission within the meaning of Protocol 18, Article 5.2, have yet been before the Council at any stage?

Mr. Peart: Yes, I have taken part in several discussions about this and I have stressed what was decided at the Dublin summit meeting. I accept that this matter has not been publicly debated as it should

have been. I have discussed quantities, but I do not want to prejudice any future discussions by stating quantities at this date. What was declared at Dublin still stands.

Mr. Buchan: Is my right hon. Friend aware that two nights ago, when his hon. Friend was being pressed to ask him to delay a decision until the will of the House was known, we were informed that we had to make a decision at that time in the interests of the New Zealand Government? I hope he will look at that.
Is my right hon. Friend aware that I welcome the fact that he delayed an agreement over butter, but will he keep in mind that our real task is to secure the continuing quantities of butter from New Zealand and to cut the levy? Does he agree that it is not a satisfactory solution that that should be shunted on to the manufacturing industry? Should it not be grappled with at the point of entry on the prices question? Is it not deplorable that the offer made on sugar is less than 2 per cent. in view of the costs over the past 12 months?

Mr. Peart: I do not want to say anything about sugar because negotiations are still continuing. We should await the outcome of those negotiations. I know what it is like because I once conducted them myself. The ACP countries have had a pretty good deal. I know their worries, because I have discussed the matter with them, but I would rather not prejudice negotiations which are still continuing.
If I could have negotiated a good deal for New Zealand yesterday after long talks and after pressing for that, I think that the House would have agreed with me, despite the view of the Scrutiny Committee. We should certainly take note of the Committee's views, but it would be absurd if a Minister was shackled to such an extent that he had to turn down a good deal.

Mr. John Davies: Is the Minister aware that I willingly accept that he talks to the Scrutiny Committee with his usual frankness and charm? His statement highlights the anxieties of the House. Does he agree that after discussions within the Council the Commission produced a totally new proposal? The whole object is that the House should be


able to influence the Minister before he has discussions, and not afterwards. Does he agree that the process of working within the Agriculture Ministers' Council denies the House that opportunity? There is something wrong with that procedure and I hope that the Minister will try to rectify this defect

Mr. Peart: I agree that there are problems about how we can improve our scrutiny and surveillance of what happens in the CAP. That is why I am always willing to report to the House after I have been there. A new proposal was made by Commissioner Lardinois. I said that I was prepared to examine it but I refused to commit myself because I wanted to have talks with New Zealand. [HON. MEMBERS: "And the House."] I am a House of Commons man just as much as my hon. Friends. I am always prepared to come to the House, as I have done today, to explain what has happened. I shall attend the Scrutiny Committee at any time, as my hon. Friends know.
Of course the House should be informed but, on the other hand, if one is negotiating, as one does in the case of the price review for our own farmers, it is important that one should not be shackled by the different views expressed by some of my hon. Friends and others. One waits until the issue is decided and then one discusses it. I shall always try to keep the House informed.

Mr. Roper: Will my right hon. Friend confirm that the Commission now operates a procedure whereby it can withdraw and resubmit proposals within a single meeting of the Council for rediscussion and agreement at that same meeting? What was it in the Commission's final proposal which led the New Zealand Government to recall their Ambassador from Brussels?

Mr. Peart: The New Zealand Government are anxious to know where they stand. I met the Ambassador immediately after the talks. They were well aware of the position. It was a new proposal and the Ambassador rightly did not want to commit himself until he knew the feelings of his Government. There was nothing wrong with that.

Mr. Rippon: Will the Minister bear in mind that Protocol 18 was negotiated for the benefit of New Zealand and that, because of the special wording of Article 5.2, there are opportunities for careful consideration? May we have an assurance that the Government will not enter into any agreement in Brussels until it has the approval of the New Zealand Government?

Mr. Peart: I accept that. That is the right approach to the negotiations, not just on butter. I have been continually in touch with New Zealand, as the High Commissioner will confirm, and I am proud to say that New Zealand Ministers have paid tribute to what I have done. I give the assurance sought by the right hon. and learned Gentleman.

Mr. Pavitt: Is the Minister aware that he was my leader in these matters and that he taught me a lot? When he is negotiating on New Zealand butter and on sugar, will he ensure that we do not go back on any of the assurances that the House and the country have given? How much beef will have to be put into cold storage to keep up the price in this country?

Mr. Peart: On our negotiations with ACP countries, the Lomé Convention was an outstanding achievement and was the result of hard negotiations. It has been reported to the House and accepted. I do not need to repeat my own defences of New Zealand.
For beef I negotiated what is called the variable premium system, which is similar to our deficiency payment system. But there is still a safety net whereby beef could go into intervention. I have already taken decisions to prevent some beef going into intervention because I thought that it would spoil the market. The system is working.

Mr. Hooson: Does the Minister agree that the mechanism for delaying a decision, which he adopted yesterday, is a desirable precedent for this type of case because it enables the House to express its views and it gives time for further consultation? Will he regard it as a precedent? On sheepmeat, is it intended to allow proposals to come only from the Commission or will the Government put


forward a proposal of their own? If so, will there be any discussion in the House before a decision is made?

Mr. Peart: In some ways it is a precedent, but there may be occasions when it is not valid. Last night, for instance, if I thought that I had been getting my way on a good settlement for New Zealand, I would have negotiated it. I would have done that despite what the Scrutiny Committee said and I think that the House would have agreed with me. If I had delayed a decision which was favourable to New Zealand, I would have paved the way for New Zealand to be let down later. In such circumstances the Minister must judge and the House must censure me if I am wrong. Whilst it may be regarded as a precedent, there are circumstances when a Minister must make a decision if he thinks that would be in the interests of the country. I hope that I would have the courage to do that.
I shall leave the situation on sheep-meat as it is. The Irish and the French have their own problems. But I shall look at it carefully, and I think that what I said to the hon. Member for Westmorland (Mr. Jopling) should satisfy hon. Members.

Mr. R. C. Mitchell: Is there any real desire among the Governments of the Community, apart from perhaps the French and the Irish, to have a managed market in sheepmeat, or is this just another of Commissioner Lardinois' idiosyncrasies?

Mr. Peart: My hon. Friend has hit the nail on the head: the French and the Irish want a sheepmeat régime. We also have an interest in that because we export a great deal of sheep and lamb to the Continent.

Mr. Welsh: Will the Minister do all in his power to ensure reasonable access for Scottish sheep producers to European markets? In particular, will he try to stop the disruptive, violent closure of the French markets?

Mr. Peart: I accept what the hon. Gentleman says. Hon. Members on both sides of the House must appreciate that we also benefit by having access to the Community for some of our agricultural exports, which I hope we shall

step up. I shall do all I can to protect them.

Mr. Leadbitter: The delaying process which my right hon. Friend used yesterday may well be a precedent, but is he aware that the fixed quantities proposed for New Zealand butter coming to this country are not known to the House, that the new proposals of the Council for butter are not known to the House, that the intervention price effect on home-produced butter is not known to the House and that, therefore, the House is, as usual, unable to influence the Government?

Mr. Peart: I hope that my hon. Friend will not exaggerate. [Interruption.] He is wrong. The quantities are in the protocol. He will see it if he goes to the Vote Office, where he will be informed. The Commission's recommendation in August 1975 was that quantities from 1978 to 1980 should be 129,000 tonnes, 121·000 tonnes and 113,000 tonnes. I hope that my hon. Friend will not exaggerate. I know him so well.

Mr. Marten: When the debate was almost concluded at 2 a.m. on Tuesday, the House was demanding to know what message would be sent from the House to the Minister at Brussels. Can he tell us what message he received? Secondly, on the question of quantities of butter, why does the right hon. Gentleman not tell us what the new proposals are? Tomorrow morning they will be in the Financial Times, which will he extremely accurate. Why is the right hon. Gentleman so confident that the new terms for sugar will be acceptable? What are they? I say to him "Tell us. Do not be ashamed."

Mr. Peart: I can assure the hon. Gentleman that even at 2 o'clock in the morning I was aware of what was happening here. [Interruption.] I was twice in Brussels. My Department—

Mr. Peter Mills: Keeps in touch.

Mr. Peart: That is a good phrase.
I shall do all I can to protect the interests of New Zealand. The hon. Gentleman mentioned the Financial Times. That is a very good paper and I hope that he reads it more. It gives very objective coverage. I believe that when we are negotiating with the ACP


countries it will be our aim to help the Community to secure a good deal for them.

Mr. Spearing: My right hon. Friend has referred to negotiation. Does he agree that the matter is something more than that in that it is the fulfilment of the Dublin renegotiated terms, which gave New Zealand at least 375,000 tonnes over three years? Can the House come to the interpretation that the offer is less than that? Will my right hon. Friend confirm the figures given in the Press and say whether the new figures, which we do not know, have an element of regressivity in them, which was a matter of some discussion in Dublin?
On sugar, does my right hon. Friend agree that the price is an important matter not only for the suppliers but for the long-term continuation of the cane sugar refining industry in this country?

Mr. Peart: I entirely agree. I know that my hon. Friend takes a great interest in the matter and places importance on our refineries and the protection of the cane sugar industry, even though we shall expand part of our sugar beet industry. But the Lomé Convention exists. We have guaranteed the producers access, but some of them do not fulfil their quota. That is another matter. I believe that, generally speaking, what will emerge will be reasonable and sensible. I cannot go beyond that, because talks are still going on and hard decisions will have to be taken.
On New Zealand, I agree with my hon. Friend that we must carry out what was agreed at the Dublin Heads of State conference. I have stressed that over and over again. I gave figures just now. The Government say, and I am sure that the Opposition leaders agree, that we must secure a good deal for New Zealand in conformity with the principles agreed at the Dublin summit.

Mr. W. E. Garrett: I am glad, Mr. Speaker, that my dogged persistence eventually led to my catching your eye. Will my right hon. Friend accept my assurance that I have always believed in his integrity with regard to New Zealand and other Commonwealth countries? But will he tell the House, especially his pro-European colleagues and particularly the most enthusiastic

ones, what benefit there will be to people such as my wife who will ultimately have to pay the price?

Mr. Spearing: Higher prices.

Mr. Peart: Let me answer. I am. tempted to say something, but perhaps I should not. All our wives shop. Support for our entry into the Community was not an easy decision for me to take, in view of my previous views, but I say to my hon. Friend and others that a man who cannot face facts is a fool. The reality is to be seen. I believe that our entry into the Community enables Britain to shape and change things, and that is happening. An example is the stocktaking document. As for the continuity of supplies, there is no cheap food anywhere in the world now.

BRITISH TRANSPORT DOCKS (FELIXSTOWE) BILL (DEBATE)

Mr. Maxwell-Hyslop: I wish to raise with you, Mr. Speaker, a point of order which I endeavoured to raise last night—I refer to column 1357 of Hansard—and which Mr. Deputy Speaker preferred not to deal with last night after you had left the Chair.
My point of order falls into two parts. The first is a request that you should declare the proceedings last night on the British Transport Docks (Felixstowe) Bill to be null by reason of failure to comply with the provisions of Standing Orders for Private Business—Standing Order 145 —and cause an appropriate correction to be made in the Journal of the House.
The second part is a request that you should draw to the attention of the parliamentary agents appearing on the Register the practice whereby Members can expect to be able to draw from the Vote Office copies of papers laid upon the Table of the House, especially the papers which Standing Orders require to be so laid when the Order Paper indicates that the House will that day enter upon business germane to such papers, as a matter of course and without Members being required to give special notice that they will require such papers to be made available.
Standing Order 145 is very short, consisting of only three lines. It states:
The minutes of the proceedings of a committee on a private bill shall be brought up


and laid on the Table of the House, with the report of the bill".
The taking of evidence before a Private Bill Committee is a proceeding of Parliament.
It has been the practice of the House, certainly for as long as I can remember, that when any paper is laid upon the Table it is available in the Vote Office. This is for the convenience of the House, the Clerks and the Chair, so that instead of Members trying to scramble for the one copy on the Table to read it they can draw a copy from the Vote Office as they come into the Chamber.
The parliamentary agents in this case know perfectly well when such papers may be required, because they obtain copies of Notice Papers of forthcoming business and the Order Paper for the day which tells them when the business concerned is to be taken. In this case, further consideration of the British Transport Docks (Felixstowe) Bill was due to be taken at 7 o'clock in the House. Not to follow that practice and to deny Member fulfilment of that expectation is such a discourtesy to the House that, I submit, it approaches the frontiers of a contempt and it may even have crossed them.
It is totally unreasonable to take an interpretation of a completely different Standing Order, which is not really concerned with Members' access to the transcript of evidence but is concerned with the question whether it should be paid for by public funds or by the promoter, and suggest that Members should have to request such papers before the Committee stage begins, when they have no means of knowing whether they will need them until the Committee stage has ended. That is a point that was made last night.
My hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths), among others, attempted to obtain from the Vote Office, from the Private Bill Office and from the Table a copy of the transcript, without success. Eventually, in the course of the debate, copies—not as many as were wanted by hon. Members, but some copies—were brought down. I can only conclude that the Table had not got a copy of the minutes of the proceedings and, thereby, the promoters had put themselves in breach of Standing Order 145. That being the case, the proceed-

ings of the House were to that extent ultra vires and should be annulled.

Mr. Speaker: May I say how grateful I am to the hon. Member for Tiverton (Mr. Maxwell-Hyslop) who, with his usual courtesy, gave me advance notice of the point of order that he wished to raise. That enables me to give a considered reply to the points he has raised. Secondly, may I say that I am sorry that I left the Chair last night. I had not realised that the hon. Member was about to pursue his point of order after the Division. If I had known I would have remained. Happily I did not know.
I am grateful, as always, to the hon. Member for the way in which he has raised this point of order. I make it clear, first of all, that I have no power to declare proceedings of this House null and void on my own authority. This can be done only by a motion agreed to by the House in the normal way. Private Business Standing Order 145 lays down that:
The minutes of the proceedings of a committee on a private bill shall be brought up and laid on the Table of the House, with the report of the bill.
The hon. Member quoted that.
In accordance with the normal practice the minutes of proceedings of the Committee dealing with the British Transport Docks (Felixstowe) Bill have been available in the Private Bill Office for inspection by hon. Members ever since the Bill was reported on 29th April. The Standing Order has, therefore, been properly complied with.
The minutes of proceedings are only a brief, formal record of the decisions of the Committee. The practice with regard to the minutes of evidence, on the other hand, was laid down by Mr. Speaker Morrison in a ruling on 30th June 1953 when he said:
any Member whose constituents may he concerned with the provisions of a Bill should give notice in the Private Bill Office of the number of copies required before the first day on which the Committee sits.—[Official Report, 30th June 1953; vol. 517, c. 205.]
This ruling is summarised in the passage in "Erskine May"—which Mr. Deputy Speaker quoted to the House yesterday.
No such notice was given to the Private Bill Office on this occasion. It is quite clear, therefore, that the parliamentary agent complied fully with the


requirements of the practice of the House as laid down by my predecessor and as it has continued to this day. It may be, however, that these requirements are no longer adequate to meet the needs of the case. That is a matter that might be suitable for consideration by the Select Committee on Procedure.

Mr. Peyton: Further to that point of order, Mr. Speaker. The House will be grateful to you for your consideration of this point and for what you have said. I would like to congratulate you, respectfully, on your being unaware last night that my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) was about to pursue the matter—although I am sure that had you reflected upon the determination of my hon. Friend you would have known, without being informed, that it was quite likely he would do so.
The remarks you have made at the end of your ruling about whether this practice is satisfactory should perhaps be taken up because the Standing Order is quite clear and says:
The minutes of the proceedings of a committee on a private bill shall be brought up and laid on the table of the House, with the Report of the bill.
It is for those who sponsor a Private Bill very scrupulously to comply with the requirements of the House. I do not believe that they have done so, in the full spirit of the Standing Order, on this occasion, particularly as this was a contentious measure.

Mr. George Cunningham: Further to that point of order. Mr. Speaker. You have said that this would be a matter which it might be appropriate for the Sessional Procedure Committee to consider. The terms of reference of that Committee unfortunately limit it to matters which have been referred to it by the House. I ask you whether at the moment the Committee would be free to consider this matter without the House having first passed a resolution. Personally I think the Procedure Committee ought to be free, as it was between 1970 and 1974, to consider any matter either which has been formally referred to it or which it, in its judgment, considers it to be wise to take up. This worked very well from 1970 to 1974 and God alone knows why we do not do it now. Is the Pro-

cedure Committee free, simply on your say-so, to consider this matter or do we need a motion explicitly referring the matter to it?

Mr. Speaker: I think I am right in saying that I have no authority to tell the Committee what it shall consider. That is a matter for the authorities in the House. The Leader of the House is here. He has heard this exchange. I do not know whether he is on the edge of his seat—

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): indicated dissent.

Mr. Speaker: The matter has been heard by those responsible for the Committee and no doubt serious consideration will be given to what has been said from both sides of the House.

Mr. George Cunningham: Further to that point of order, Mr. Speaker. Since it seems likely that in the light of this exchange the Leader of the House will be thinking about it and may be tabling a motion specifically to refer this point to the Procedure Committee, may I draw to your attention, Mr. Speaker, and to that of my right hon. Friend the other little fracas which occurred later last night with regard to the detestable hat which requires to be worn, contrary to the dignity of any hon. Member, when he wishes to raise a point of order during a Division? If the Leader of the House is proposing to table a motion referring the first, more important, matter to the Procedure Committee, could he also embrace the hat, so that the Procedure Committee should give that mighty trifle as much time as it deserves, which I would say is about 30 seconds, and recommend to the House an alternative and adult manner in which points of order can be raised during a Division without our behaving in the infantile manner in which we are obliged to behave at the moment?

HOUSING (SHORTHOLD TENANCIES)

4.47 p.m.

Sir Brandon Rhys Williams (Kensington): I beg to move,
That leave be given to bring in a Bill to make further provision for the letting of residential properties on fixed terms; and for purposes connected therewith.
In February of this year the Government published figures showing that at the end of 1974 the total housing stock in this country consisted of 19,625,000 dwellings but that at the same time the total number of households was only 18,900,000. This shows that we now have a surplus of 725,000 dwellings. We ought to take into account commercial properties with potential for part-residential letting and private properties which could reasonably be divided into self-contained units but which are not at present on the market. Taking those properties into account as well, I suppose that we have over 1 million empty or unused but potentially usable residential properties in Great Britain as a whole.
Although many of these properties are in the wrong place and many are below acceptable standards, clearly we could be making much better use of our existing housing stock. I do not think that is a matter of controversy. Homelessness and inadequate housing may be due to shortage of financial resources either for rent or home improvement, but insofar as they are due to a physical shortage of accommodation, the problems are of our own making. In Kensington—and I know this is so in many other districts in Central London and, I believe, in many of our major cities—we have thousands of empty houses and flats. We also have thousands of families who ought to be better housed.
I speak of Kensington because it is the constituency I have the honour to represent, and also because it is so frequently cited as a housing stress area. It ought to be easier for the parties to come together and to reach an understanding about their accommodation which is fair to both sides.
The object of the Bill which I am hoping to introduce, which will be very similar to that which the House gave me leave to introduce in the last Session.

is to make a new departure in housing law to provide accommodation for those who need it and incentives for letting for those who own it.
My concept of the shorthold is of a new form of tenure which would give the certainty of vacant possession, if required, to the owner at a fixed date in the future—probably at least a year ahead, and maybe some years ahead—and certainty of security of tenure until that date for the tenant.
The question of security of tenure is one which has very often been debated in this House. I should like to make the point that many people do not need absolute permanent, life-long security of tenure. I am thinking, for instance, of young marrieds making their first home, who want something which is relatively inexpensive and which, of course, does not necessarily provide them with accommodation for the family they hope to raise in due course. There are also people who are expecting to inherit a house in course of time and people whose jobs take them on temporary assignments to places where they have no intention of settling in the long run. One can think of many other examples of people needing accommodation for periods of a year or more, and who do not want to acquire it on a permanent basis.
I believe that many owners would be encouraged to let if they knew that they could obtain possession on a certain date in the future, and that they would be glad to let. There is not a malicious category of owners of property who keep their property off the market because it gives them some satisfaction to do so.
If we may consider the safeguards for the tenant which I would seek to incorporate in the Bill, first, a property to be elegible for a shorthold tenancy must be up to standard. I would prefer that it should not just be equal to the standard laid down in the Housing Acts but that it should be near to the standard which would make it suitable for an improvement grant, if it were a question of making application for the grant.
I think that shorthold tenancies should be at the fair rent for the premises. The nature of the tenancy must be explained to the tenant, so that there is no doubt whatever as to the commitment that the tenant is making and what his or


her rights are. The tenant should have the option to renew if the landlord wishes to offer the property again on shorthold lease. As a new condition, I should like to suggest that the owner should give not less than three months' notice of his intention when the shorthold arrangement comes to an end, so that, if he should wish to take possession of the property again, the tenant has good opportunities of finding somewhere else to go.
I recognise that a problem could arise at the end of the tenancy if the tenant still had nowhere to go, but the more properties that are available for renting, the better the tenant's chance of finding another place. It cannot be sensible to reconcile ourselves to leaving many thousands of people —perhaps tens of thousands —in inadequate or unsuitable accommodation for years to come while we have properties standing empty which could meet their needs in very many cases, just because we are afraid of getting back to our present difficulties in some of the cases in due course when the short-holds expire but are not renewed.
The same problem arises in the case of owner-occupation under the 1974 Rent Act but it has not led, as far as I am aware, to a strong demand for security of tenure in owner-occupied properties. Shopkeepers run the same risk, but their form of tenure is not a major social problem.
I do not offer the Bill as a panacea but as a means of adding usefully to the availability of property to rent, as a way to prevent the further decay of our housing stock, as an encouragement for the use of improvement grants, and as a facility, under proper supervision, for solving a real social need, particularly in Central London.

5.5 p.m.

Mr. Joseph Dean (Leeds, West): I object to the Bill. One of the phrases used by the hon. Member for Kensington (Sir B. Rhys Williams) indicates the difference between my own thoughts, and perhaps my own party's thoughts, and those of the party to which the hon. Member belongs. He said that many people do not need security of tenure. I submit that there are many people who need the security of tenure that the present Labour Government gave them.

Sir John Hall (Wycombe): On a point of order, Mr. Deputy Speaker. Do I understand correctly that the hon. Member is not opposing the Bill?

Mr. Dean: I said that I object to the Bill.

Sir John Hall: I am sorry, Mr. Deputy Speaker. I thought the hon. Member said that he was not objecting.

Mr. Dean: I made it quite clear at the beginning that I was objecting.
At the last General Election, and the preceding one, it was quite an important plank of our platform that we would give security of tenure in the private sector and extend it to cover all facets of rented property in the private sector. I can see this Bill only as smashing a large hole in that very necessary legislation.
I believe that any fresh housing legislation dealing with the rented sector at present would only complicate what is already a very complicated situation. The present Secretary of State has already set in being a rent review committee to look into the whole aspect of private rented accommodation, to submit its findings to this House in a Bill designed to regularise and simplify matters, and to remove some of the very grave anomalies that exist.
The hon. Member said that many properties are empty, but I submit that there is a better method of dealing with them than by removing security of tenure and making them open to market forces. Under the present Government, over 40 local authorities are, with Government backing, making a very serious effort to deal with this problem by leasing private property and then re-renting it, either on an individual basis or to housing associations or to housing corporations. That is a much better way of doing it.
The hon. Member, in moving the Bill, looked at the private landlord through rather rose-coloured glasses. If the private landlords, before the existing housing legislation was brought in, had in the main behaved reasonably to tenants in the stress areas —and the Bill is concerned with areas where there is a housing shortage and with very high rents —there would never have been any need to provide security of tenure. But we knew what was going on in the stress areas. There


was harassment of tenants. there was victimisation, and in some parts of London evictions in the stress areas became almost the order of the day.
I submit that if the Bill were to be accepted and finally moulded into an Act, it would have the very opposite effect to that which the hon. Member thinks it would achieve, that is, to provide more rented accommodation and to give people a chance of rented property in the private sector. I believe that, on the contrary,

it would make it much more difficult, and that the removal of the security of tenure enjoyed by tenants in the private sector would be a grievous step backward. I could not possibly support it.

Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of Public Business): —

The House divided: Ayes 202, Noes 161.

Division No. 147.]
AYES
[5.0 p.m.


Adley, Robert
Goodhew, Victor
Mitchell, David (Basingstoke)


Atkins, Rt Hon H. (Spelthorne)
Gower, Sir Raymond (Barry)
Moate, Roger


Awdry, Daniel
Grant, Anthony (Harrow C)
Molyneaux, James


Bain, Mrs Margaret
Gray, Hamish
Monro, Hector


Baker, Kenneth
Grimond, Rt Hon J.
Montgomery, Fergus


Banks, Robert
Grist, Ian
Moore, John (Croydon C)


Beith, A. J.
Grylls, Michael
Morgan, Geraint


Bell, Ronald
Hall, Sir John
Morris, Michael (Northampton S)


Bennett, Sir Frederic (Torbay)
Hall-Davis, A. G. F.
Morrison, Charles (Devizes)


Bennett, Dr Reginald (Fareham)
Hamilton, Michael (Salisbury)
Morrison, Hon Peter (Chester)


Benyon, W.
Hampson, Dr Keith
Mudd, David


Berry, Hon Anthony
Harvie Anderson, Rt Hon Miss
Neave, Airey


Biffen, John
Hawkins, Paul
Nelson, Anthony


Biggs-Davison, John
Hayhoe, Barney
Newton, Tony


Blaker, Peter
Heseltine, Michael
Normanton, Tom


Boscawen, Hon Robert
Higgins, Terence L.
Nott, John


Bottomley, Peter
Holland, Philip
Onslow, Cranley


Bowden, A. (Brighton, Kemptown)
Hooson, Emlyn
Oppenheim, Mrs Sally


Boyson, Dr Rhodes (Brent)
Howe, Rt Hon Sir Geoffrey
Page, John (Harrow West)


Brittan, Leon
Howell, David (Guildford)
Page, Rt Hon R. Graham (Crosby).


Brocklebank-Fowler, C.
Hunt, John
Pardoe, John


Brotherton, Michael
Hurd, Douglas
Parkinson, Cecil


Buchanan-Smith, Alick
Hutchison, Michael Clark
Penhaligon, David


Budgen, Nick
Irving, Charles (Cheltenham)
Peyton, Rt Hon John


Burden, F. A.
Jenkin, Rt Hon P.(Wanst'd amp; W'dt'd)
Raison, Timothy


Butler, Adam (Bosworth)
Jessel, Toby
Rees, Peter (Dover amp; Deal)


Carson, John
Johnson Smith, G. (E Grins[...]ead)
Rees-Davies, W. R.


Chalker, Mrs Lynda
Jones, Arthur (Daventry)
Reid, George


Channon, Paul
Jopling, Michael
Renton, Rt Hon Sir D. (Hunts)


Clark, Alan (Plymouth, Sutton)
Joseph, Rt Hon Sir Keith
Renton, Tim (Mid-Sussex)


Clark, William (Croydon S)
Kershaw, Anthony
Rifkind, Malcolm


Clarke, Kenneth (Rushcliffe)
Kimball, Marcus
Roberts, Michael (Cardiff NW)


Cockcroft, John
King, Evelyn (South Dorset)
Roberts, Wyn (Conway)


Cooke, Robert (Bristol W)
King, Tom (Bridgwater)
Rodgers, Sir John (Sevenoaks)


Cope, John
Kitson, Sir Timothy
Rossi, Hugh (Hornsey)


Cormack, Patrick
Knight, Mrs Jill
Rost, Peter (SE Derbyshire)


Corrie, John
Knox, David
Sainsbury, Tim


Crawford, Douglas
Lane, David
St. John-Stevas, Norman


Crouch, David
Langford-Holt, Sir John
Shepherd, Colin


Crowder, F. P.
Lawrence, Ivan
Shersby, Michael


Dodsworth, Geoffrey
Lawson, Nigel
Silvester, Fred


Douglas-Hamilton, Lord James
Le Merchant, Spencer
Sims, Roger


Drayson, Burnaby
Lester, Jim (Beeston)
Skeet, T. H. H.


Durant, Tony
Lewis, Kenneth (Rutland)
Speed, Keith


Dykes, Hugh
Lloyd, Ian
Spicer, Jim (W Dorset)


Eden, Rt Hon Sir John
Luce, Richard
Spicer, Michael (S Worcester)


Edwards, Nicholas (Pembroke)
McAdden, Sir Stephen
Sproat, lain


Elliott, Sir William
McCrindle, Robert
Stanbrook, Ivor


Eyre, Reginald
McCusker, H.
Stanley, John


Fairbairn, Nicholas
MacGregor, John
Steel, David (Roxburgh)


Fairgrieve, Russell
Macmillan, Rt Hon M. (Farnham)
Steen, Anthony (Wavertree)


Fisher, Sir Nigel
McNair-Wilson, M. (Newbury)
Stewart, Ian (Hitchin)


Fletcher-Cooke, Charles
Marshall, Michael (Arundel)
Stonehouse, Rt Hon John


Fookes, Miss Janet
Marten, Neil
Stradling Thomas, J.


Forman, Nigel
Mates, Michael
Thatcher, Rt Hon Margaret


Fox, Marcus
Mather, Carol
Thomas, Rt Hon P. (Hendon S)


Freud, Clement
Maude, Angus
Thompson, George


Fry, Peter
Maudling, Rt Hon Reginald
Townsend, Cyril D.


Galbraith, Hon. T. G. D.
Maxwell-Hyslop, Robin
Trotter, Neville


Gardiner, George (Reigate)
Mayhew, Patrick
van Straubenzee, W. R.


Gardner, Edward (S Fylde)
Meyer, Sir Anthony
Vaughan, Dr Gerard


Gilmour, Rt Hon Ian (Chesham)
Miller, Hal (Bromsgrove)
Welder, David (Clitheroe)


Gilmour, Sir John (East Fife)
Mills, Peter
Walker-Smith, Rt Hon Sir Derek


Goodhart, Philip






Wall, Patrick
Welsh, Andrew
Wood, Rt Hon Richard


Walters, Dennis
Whitelaw, Rt Hon William
Younger, Hon George


Warren, Kenneth
Wiggin, Jerry
TELLERS FOR THE AYES:


Weatherill, Bernard
Wilson, Gordon (Dundee E)
Sir Brandon Rhys Williams and


Wells, John
Winterton, Nicholas
Mr. Norman Tebbit.




NOES


Abse, Leo
Forrester, John
Newens, Stanley


Archer, Peter
Freeson, Reginald
Noble, Mike


Ashley, Jack
Garrett, John (Norwich S)
O'Halloran, Michael


Atkins, Ronald (Preston N,
Garrett, W. E. (Wallsend)
Ovenden, John


Bagier, Gordon A. T.
George, Bruce
Palmer, Arthur


Barnett, Guy (Greenwich)
Ginsburg, David
Park, George


Bates, Alf
Graham, Ted
Parker, John


Benn, Rt Hon Anthony Wedgwood
Grant, George (Morpeth)
Parry. Robert


Bennett, Andrew (Stockport N)
Grocott, Bruce
Pavitt, Laurie


Bidwell, Sydney
Hamilton, James (Bothwell)
Pendry, Tom


Bishop, E. S.
Hamilton, W. W. (Central Fife)
Perry. Ernest


Blenkinsop, Arthur
Harper, Joseph
Phipps, Dr Colin


Bottomley, Rt Hon Arthur
Harrison, Walter (Wakefield)
Radice. Giles


Bray, Dr Jeremy
Hatton, Frank
Richardson, Miss Jo


Brown, Hugh D. (Provan)
Hayman, Mrs Helene
Roberts, Gwilym (Cannock)


Brown, Ronald (Hackney S)
Heffer, Eric S.
Rodgers, George (Chorley)


Buchan, Norman
Howell, Rt Hon Denis
Rooker, J. W.


Buchanan, Richard
Hoyle, Doug (Nelson)
Ross, Rt Hon W. (Kilmarnock)


Callaghan, Jim (Middleton amp; P)
Hughes. Robert (Aberdeen N)
Sedgemore, Brian


Canavan, Dennis
Hughes, Roy (Newport)
Selby, Harry


Cant, R. B.
Hunter, Adam
Silverman, Julius


Carmichael, Neil
Irvine, Rt Hon Sir A. (Edge Hill)
Skinner, Dennis


Carter-Jones, Lewis
Jenkins, Hugh (Putney)
Small, William


Cartwright, John
Johnson, Walter (Derby S)
Snape, Peter


Cocks, Michael (Bristol S)
Jones, Dan (Burnley)
Spearing, Nigel


Cohen, Stanley
Kaufman, Gerald
Spriggs, Leslie


Coleman, Donald
Kelley, Richard
Stallard, A. W.


Cook, Robin F. (Edin C)
Lamond, James
Stott, Roger


Corbett, Robin
Leadbitter, Ted
Strang, Gavin


Cox, Thomas (Tooting)
Lee, John
Taylor, Mrs Ann (Bolton W)


Craigen, J. M. (Maryhill)
Lewis, Arthur (Newham N)
Thomas, Mike (Newcastle E)


Crawshaw, Richard
Lewis, Ron (Carlisle)
Thomas, Ron (Bristol NW)


Cryer, Bob
Lipton, Marcus
Tierney, Sydney


Cunningham, G. (Islington S)
Litterick, Tom
Tinn, James


Davies, Bryan (Enfield N)
Lomas, Kenneth
Tomlinson, John


Davies, Denzil (Llanelli)
Loyden, Eddie
Torney, Tom


Davies, Ifor (Gower)
Lyon, Alexander (York)
Wainwright, Edwin (Dearne V)


Davis, Clinton (Hackney C)
Lyons, Edward (Bradford W)
Walker, Terry (Kingswood)


Dean, Joseph (Leeds West)
McCartney, Hugh
Ward, Michael


Dempsey, James
McElhone, Frank
Watkins, David


Doig, Peter
MacFarquhar, Roderick
Watkinson, John


Dunn, James A.
Mackintosh, John P.
White, Frank R. (Bury)


Dunnett, Jack
McNamara, Kevin
Whitlock, William


Eadie, Alex
Mahon, Simon
Wigley, Dafydd


Edge, Geoff
Mallalieu, J. P. W.
Williams, Alan (Swansea W)


Ellis, John (Brigg amp; Scun)
Marks, Kenneth
Wilson, Alexander (Hamilton)


English, Michael
Marquand, David
Wilson, William (Coventry SE)


Evans, Fred (Caerphilly)
Marshall, Dr Edmund (Goole)
Wise, Mrs Audrey


Evans, Gwynfor (Carmarthen)
Maynard, Miss Joan
Woodall, Alec


Evans, Ioan (Aberdare)
Mellish, Rt Hon Robert
Young, David (Bolton E)


Faulds, Andrew
Mikardo, Ian



Fernyhough, Rt Hon E.
Millan, Bruce
TELLERS FOR THE NOES:


Fitt, Gerard (Belfast W)
Mitchell, R. C. (Soton, Itchen)
Mr. Max Madden and


Fletcher, Ted (Darlington)
Morris, Alfred (Wythenshawe)
Mr. Ivor Clemitson.


Foot, Rt Hon Michael
Morris, Charles R. (Openshaw)

Question accordingly agreed to.

Bill ordered to be brought in by Sir Brandon Rhys Williams, Mr. Kenneth Baker, Mr. Hugh Dykes, Mr. Geoffrey Finsber, Mr. David Knox, Mr. Michael Shersby, Mr. Cyril Townsend and Mr. Christopher Tugendhat.

HOUSING (SHORTHOLD TENANCIES)

Sir Brandon Rhys Williams accordingly presented a Bill to make further provision for the letting of residential properties on fixed terms; and for purposes connected therewith: and the same was read the First time; and ordered to be read a Second time upon Friday next and to be printed. [Bill 150.]

NATIONALISATION

Mr. Deputy Speaker (Mr. Oscar Murton): Mr. Speaker has selected the amendment in the name of the Prime Minister and his right hon. Friends: to leave out from "House" to the end of the Question and to add instead thereof:
believes that it is in the best interess of British Industry and the Nation that the Government should continue to develop its industrial strategy in accordance with the principles and objectives of the Industry Act; and welcomes the constructive contribution already made to this work by the National Enterprise Board and the discussions on the Industrial Strategy at the NEDC".

5.11 p.m.

Mr. Michael Heseltine: I beg to move,
That this House calls on Her Majesty's Government to dispel the damaging uncertainty about the future of banking, insurance and pharmaceutical manufacturing, by stating categorically that they have no intention of nationalising companies in these industries.
This debate is about the threat of nationalisation to banks, insurance companies and the pharmaceutical industry in this country. [HON. MEMBERS: "Nonsense."] I am delighted that hon. Members at such an early stage in the debate should suggest that this is not a threat. If they had made that clear in the beginning and not put down an amendment, we could have been saved a debate in the first place. The Government have made it clear in their amendment that they are not prepared to make their decision on this vital matter totally clear. But we shall put the situation before the people of this country, however embarrassing it may be for hon. Members opposite to hear it. The fact of the matter is that everything I shall say arises from the firm manifesto pledges and policy research proposals of the Labour Party or speeches from senior Cabinet Ministers.
There is a familiar process which leads to State ownership of industry, and it is well under way within the Labour Party in respect of these industries. It is a process which causes continuing harm, creates uncertainty, and distorts investment. It is a process which has

been embarked upon decade after decade by the Labour Party, under pressure from the Left wing.
Not only is it a familiar process to remove the private sector and to put it into State hands but it is part of a deliberate attempt to bring about what the Labour Party regards as a fundamental shift of power in society. That is what the debate is about today —the fundamental shift of power in society from private citizens to the hands of the State to be used as the Labour Party so decides. [HON. MEMBERS: "Nonsense."] It is very helpful to have the guidelines totally clarified at this early stage in the debate.
The three industries —banking, insurance and pharmaceuticals —can be divided into two categories. Banking and insurance are central to the debate about the level and quality of investment in British manufacturing industry. Pharmaceuticals is a manufacturing industry which can be judged against the standards of success or failure which should be applied to any sector of the economy.
The Labour Party policy documents which deal with banking and insurance rehearse the familiar Left-wing arguments, but before we come to the precise arguments contained in the various documents we should establish the common ground between the two sides. Both sides want to see an increase in the wealth-producing capability of British industry, but each side has different priorities on what should be done with the wealth and who should own it. But the language of politics is sterile if the resources cannot be earned to turn ambitions into action.
The unbridgeable difference between the two sides starts with the claim by certain sections of the Labour Party that these institutions have failed to produce the cash to enable the investment without which wealth creation is held back. If that were true, they would have a powerful case. But if one studies the research documents of the Labour Party one will not find a single example to show where this has happened. The theme is repeated on page after page. All that is missing is any evidence to substantiate that theme.
The facts are interesting to read because they are scientifically engineered to present British banks in the least


favourable light possible. It is very interesting to read the draft policy paper published in October 1975, in which we have this statement:
The proportion of bank loans which go to manufacturing industry in Germany is not very much higher than in the United Kingdom.
By the time that policy document had been redrafted in February 1976, this damaging revelation in the attempt to show the superiority of the German system had been totally removed so that it was unable to reach the eyes of the Left.

Mr. Brian Sedgemore: Would the hon. Gentleman seek to analyse the statistics in the two documents and relate them to the proportion of long-term bank loans and the purposes for which they are given in Germany, and the proportion of short-term bank loans and the purposes for which they are given in the United Kingdom?

Mr. Heseltine: This information is not available, because the method of revolving credit for reviewing and re-equipping does not provide the basis of this analysis which the hon. Gentleman wants. It is because they cannot get this simple fact on board that they are having the analysis. It is not surprising that they withdrew the suggestion about German banks because it is proved fallacious when one investigates the situation in detail.
The entire thesis of the paper concentrates on the provision of funds, but makes no attempts to prove that if there is insufficient investment, the fault is that of the investor. The new theology seems to emerge "Let there be money, and investment will look after itself".

Mr. Ian Mikardo: Just the opposite is true.

Mr. Heseltine: The hon. Member is right. The opposite is true. But the analysis of the paper is as I have stated it. The more one reads the paper, the more one realises that the central question remains. Where are the British companies which, year after year have been sent away empty by British banks? Where are the investment projects which have been held back because the managers of British industry have refused the finance to carry them out even though they

believe that the projects were viable and their companies had the asset backing to carry them through? No matter where one looks in the papers, one does not find even one example of one company or one project that has been so held back, and it is for that reason, if no other, that these arguments are wholly spurious and designed to prove a case that has no validity.
If one starts at that end of the argument one is bound to reach the wrong conclusion. If one starts at the other end one comes to a very different conclusion, and it is clear that the Labour Party researchers have conveniently ignored, because it does not suit their dogma, the underlying realities of the British industrial manufacturing crisis. Let us have no illusions about the fact that there is a crisis.
The crisis that they have failed to spell out is that, measured in terms of rate of return, investment in British industry earns less than comparable industry is able to earn abroad. The rates of interest that British manufacturing industry has to pay, and has no choice but to pay, have been consistently higher than the rates available to our competitors abroad, not because the investors were responsible, but because the economic management of the economy demanded that there should be high rates of interest in Britain, which meant that there was no way, short of subsidisation of industry, to invest at rates that were competitive with those enjoyed by our foreign competitors. That was a responsibility not of the investors but of the central management of the economy by varying Governments from time to time.
If Labour Members could begin to understand that, and begin to understand that it is the absence of profit that underlies our problems, they would begin to get somewhere close to realising why British industry has invested insufficiently for so long. They would begin to understand, as the Trades Union Congress Economic Review understood, that the situation resulted not from a shortage of funds but from the direction in which the funds went to seek more profitable avenues elsewhere, and that if the profits had been available in British manufacturing industry the funds that flowed to more profitable avenues outside manufacturing industry would have flowed into manufacturing industry precisely as they did


throughout the rest of the Western world.

Mr. Ian Wrigglesworth: Will the hon. Gentleman tell the House why the property sector during the era of competition and credit control was made so profitable, and by whom?

Mr. Heseltine: The hon. Gentleman is reinforcing my point. It was profitable, and therefore funds flowed into that sector. I should be the first to say —this is not an issue on which I disagree with the hon. Gentleman —that there would have been an argument for having more sophisticated techniques to ensure that British manufacturing industry was sufficiently profitable to attract the funds that were available.

Mr. Mikardo: How does the hon. Gentleman reconcile what he has been saying with the fact that between 1971 and 1973, when the profits of British industry were booming and it had the advantage of a considerable reduction in corporation taxation, there was a fall of one-third in investment?

Mr. Heseltine: The hon. Gentleman is a sophisticated economic and industrial consultant. He knows about the time lags involved —profits rise, and investment follows 18 months later. The charts are clear and historically valid for a longer period than the highly selective period chosen by the hon. Gentleman. If he studies the charts he will see that whenever profits have risen, after a period investment has followed, and if only we could have maintained that increase in profitability investment would have continued to rise. However, by a policy of stop-go, and latterly because of the Government's counter-inflation policies, we have cut into the cycle and profits have declined and investment has followed downwards. No other analysis is credible against the facts of Britain's economic performance over the past 30 years and the hon. Gentleman knows it as well as anyone else. Most of us have the integrity to admit that the analysis is true, but the hon. Gentleman is making narrow party points to support his dogma.
Consistently, it has been not the shortage of cash that has been the problem but the lack of confidence by industrialists generally that they had opportunities to invest in Britain in the circumstances of our economic situation or that their

companies had sufficient strength to justify the additional borrowing. It is because, decade after decade, there has been a prevailing climate in which those circumstances have existed that we have now so seriously eroded our manufacturing base, and until we recognise and rectify this position the decline will continue.
By implication, the documents realise that truth but cannot admit it because it does not conform to the ideology of the extreme Left. Behind the argument for the nationalisation of the banks and insurance companies, the creation of a National Enterprise Board, and all the other paraphernalia with which we are familiar, there is the growing threat of the central direction of investment. That is the logical step in the argument, and many Labour Members would admit that and be proud of it. It is a logical step because they realise that the provision of cash alone will not lead to increased investment. They therefore realise that they would need compulsory powers to instruct that investment should take place where commercial management in its judgment would not carry it out unless the overriding conditions are fulfilled.
The Chequers statement recognised the need for profit but no one can fail to contrast the White Paper associated with Chequers with what has been said elsewhere. It is very interesting to listen to the jeering from Labour Members and then to read what their own Government in their recent White Paper said about the profits at which these hon. Members sneer. The Government said that it was necessary to have circumstances
ensuring that industry, both public and private, is able to earn sufficient profits on its investment to spur managements to expand and innovate and to provide them with internal finance on which to base investment.
That is true. That was said in the Government's White Paper, and it is fundamentally in conflict with all the arguments from the left wing of the Labour Party, inherent in the policy documents that we are debating.
No one can fail to contrast that statement of sanity, which 18 months of economic mismanagement forced the Government to publish 18 months after they came to power, with the incalculable harm that policy documents and manifesto pledges of the Labour Party


have done to British investment projects over the past 30 years. The quotation that I have given from that White Paper is typical of other statements in it. But the other document, which is now the basis of the research into and objective analysis of the malaise of British manufacturing industry presents us with the problem that one can wade through 32 pages of verbiage and not once find the word "profits".
One or other of those documents has to be wrong, and nothing more clearly reveals the fundamental inability of the Government to create an economic policy that has credibility than this clear divide between the two wings of the Labour Party. It is because policy documents of this sort always anticipate the next leap forward, the next debilitating compromise between Social Democrat and Socialist, that Britain is left with the worst of both worlds —neither a free enterprise system fuelled by sufficient profit nor a State system backed by the central directing control which is the only, if wholly inadequate, substitute for profit.
It is extraordinary to read the criticisms of the banking system in Britain that are to be found throughout the papers and then to read the conclusion that nationalisation will put them right. They say that there is not enough consumer choice, and the solution is supposed to be to have a nationalised bank to improve the quality of consumer choice. That was the argument used by the Secretary of State for Energy when he launched the great Giro—the great people's bank to give all this choice to all those disgruntled citizens of the land. How many years was it before it cost those very citizens £30 million to pick up the tab of the Socialist extravaganza of yesteryear?
Next we are told that there is too much concentration in British banks. The State is to take over one of the banks. To achieve what? Neither more concentration nor less. It is a difference in ownership of one of the banks, so it will have no effect one way or the other on concentration.
Next there is the implication that nationalisation would increase the level of competition between banks. I suggest that the authors of this document should

spend a day discussing with some of the citizens of this country the quality of service and the level of competition that State ownership has brought wherever it has been introduced into industry. We are told that nationalisation is commonplace in Europe but it works there because the Governments of those countries have set clear disciplines on themselves so that the banks are free to give every help to the development of free enterprise companies.
The architects of the policy we are discussing are not interested in trying to expand and develop the free enterprise system. They want to nationalise banking in order to get the people's resources to undercut and undermine the free enterprise system. They want the people's cash to do what the people would never voluntarily do themselves.

Mr. Eric S. Heller: The hon. Gentleman refers to nationalised industries as if they were always incompetent and unable to carry out efficient programmes. Is he not aware of the vast conversion to North Sea gas throughout the country which, apart from certain teething troubles, was carried through with the greatest efficiency? Let him contrast that with the modernisation of council houses carried out by private enterprise companies which, as any hon. Member will know, has produced complaint after complaint about the inefficiency of the private enterprise firms and their skimpy work.

Mr. Heseltine: The hon. Member obviously has a welter of experience of such complaints in his constituency. There has never been a complaint in my constituency about the problem to which he referred. If there had been I would be better briefed on the subject.

Mr. Heffer: The hon. Gentleman does not represent a big city.

Mr. Heseltine: In many ways my postbag from big cities is as large as that of the hon. Member. People mention a whole range of problems. They complain about many things, but they have never brought to my attention the matter to which the hon. Gentleman referred. It is just conceivable that he is back on the bandwagon of dragging up irrelevant and unsubstantiated facts to prove something which suits his political case.
We can have no idea how the private sector would have done in the conversion to North Sea gas because the gas boards are a monopoly. We know what the programme cost, but we can have no idea whether private enterprise could have done it cheaper. My faith in the system is such that I should have liked it to try. Let me put a proposition to the hon. Member for Liverpool, Walton (Mr. Heffer) as a fair minded Member —let us allow competition in the gas industry and see, after a decade or so, whether my system is better than his. The reason I find the hon. Gentleman's views so unacceptable is that whenever a choice could be made, he never allows it. He always wishes to use the power of the State to eliminate the private sector and to put monopolies in the hands of the State.
These documents analyse the European banking situation in order to prove that nationalisation is the panacea for the problems of banking and virtually everything else. But it is interesting that this comprehensive survey of the European banking scene manages to trip ever so lightly over that paragon of all Socialist virtue —Sweden. Is it possible that the authors, after going through country after country in Europe, did not omit Sweden as an oversight? Is it possible that, on this rare occasion, they left Sweden out of the calculations because the big banks in Sweden are in free enterprise ownership? Could they have been left out because they did not suit the curious argument that nationalisation is necessary in order to sustain a Socialist economy? Yet this claims to be a serious research document into the methods of running a free enterprise system with banking in either public or private hands.
If there is one argument upon which we could all agree, it is that where the document attacks the profits of banks and argues that a nationalised bank would ensure that this profitability was ended. If that were the whole case, I would surrender —game, set and match. I know from every precedent that if there is one way to undermine the profitability of the banks it is to put the clammy hands of the Ministers opposite into one of them.

Mr. E. Fernyhough: What about the investigations going on in the Bank of England?

Mr. Heseltine: If I were the right hon. Gentleman, I would not talk about investigations and the like. We have had enough of the moral sanctity from his side of the House.
There is one quotation in the document which has nothing to do with economic argument, but which shows a shrewd assessment of public and political attitudes. After pressing its arguments with the conviction of a man who says what he believes and then attacks his opponents in order to disguise the paucity of his own case, we find this comment on page 28 of the document:
There is a political issue here since banking is perhaps the most difficult and emotive area in the whole public ownership debate.
That is absolutely right. The customers do not want nationalisation. The arguments have no credibility. The employees have shown no interest in it and the principal unions involved have not asked for it.
The most constructive announcement the Government could make today —instead of their rather vague, diversionary amendment —would be to tell the 200,000 people who work for the free enterprise banks that there are no proposals by the Government, or intentions which could be converted into policies, for nationalising any of the British clearing banks.
Underlying the paper's criticism of the banks is the assumption that the investment of the State will lead to more and better investment. The most sinister long-term consequence of these attitudes is that they justify both the concentration in the hands of the State of the power to direct investment and the imposition of more and more selective controls to prevent the workings of the market from taking over the task which the Left is so determined should be carried out by the State.
Industrial success cannot be measured by profits when profits are tightly controlled. Investment cannot be rewarded by dividends when dividends are closely restricted. The practical implication of the theory is that if the State constrains profitability in the private sector, investment will dwindle and prove the case that only the State can make good the deficiency in investment. Price control, dividend restraint, excessive taxation —all, in their way, play a part which none of them plays in countries where investment is more successful than here.

Having shackled the free enterprise system, the scene is set for the State to claim the right to be the sole or main provider of investment. Having set the scene and created the restrictions which prevent the private sector from working, the State controls the provision of funds. The NEB has a budget of only £250 million a year for each of the next four years. That is supposed to be a substitute for the capital markets of the City of London which, in the last 17 months, have produced £2,000 million to a limited number of companies. That is supposed to be a substitute for the system which, one day last week, produced £200 million —nearly the entire annual budget of the NEB —for ICI, one of Britain's largest companies.
The continuing emphasis on centralised control enables the imposition of suffocating restraint on the successful companies. The prize claimed for all this is that it allows the Government to recycle company or personal taxes away from those with the skill to make profits and incomes which were taxed in the first place in favour of those who conform to bureaucratic standards must inevitably run down. That is not backing success, as the Government claim. It is restraining success in order to bolster up the less successful. What an extraordinary concept of economic allocation.
In the public sector, for decades, we have had examples of how it works out in practice. Stripped of all the rhetoric and all the promises, we have seen precisely how the system works in the hands of the nationalised industries. Every Minister who has been part of the process, from any Government, will understand the inability to control, to know or to ensure success in the way that every one of us has found. It has escaped us.
Let us analyse what happens. In fact, it always happens in this way. Every proposal from the public sector makes good returns in advance, in theory, on paper. Every proposal of any scale from a nationalised industry is submitted, through the departmental processes, to Ministers for their approval, and down comes the rubber stamp with loud acclaim because the profits are shown to be there on paper, in theory, in advance. When they have been approved by the sponsoring Department, they are

whisked off to the Treasury, where another rubber stamp comes down to put one more approval signature on the investment programme. And the task is done.
In that way the State has proved that it has controlled investment and authorised the investment to take place. Despite all those checks and scrutinies, and all the burrowing around by a two-tier or three-tier Civil Service process, when the harsh light of day gets near to these investments they all show devastating losses or completely inadequate returns.
There is nothing that we in the House have ever been able to devise to stop that from being the system, yet that is the system which the Labour Party is now seriously contemplating applying not only to the existing nationalised industries but taking and injecting into one of the great commercial centres of Britain's manufacturing capabilities.

Mr. Bob Cryer: Will the hon. Gentleman explain how his present comments relate to the rescue of Rolls-Royce by his own Government?

Mr. Heseltine: It is like Pavlov's dogs. Labour Members have only to find one example of a company which went wrong —

Mr. Cryer: One case?

Mr. Heseltine: —and which we, for public reasons, took into public ownership, to believe that that destroys the whole case. What the hon. Gentleman never mentions when he asks that question is the Minister who encouraged the private sector company to go ahead with the first contract. Who was the Minister who gave the impression to the private sector company that it would get the Government funds that were necessasry to carry through the contract, who told the House with great aplomb and glee "This is the way business is done. I pick up the telephone and another £10 million is transferred from the State to the private sector."? That was the Secretary of State for Industry. It was precisely the same effervescence and over-enthusiasm that carried itself through with the case of British Leyland. That was exactly the same situation.

Mr. Cryer: Why did you nationalise?

Mr. Heseltine: Because there was no practical alternative, bearing in mind the defence interests of the country. We took what was a wholly reasonable decision, which I would defend with total conviction. We took that decision not for dogmatic reasons but because the national interest was paramount, because there was no reasonable alternative. To believe that one can generalise, by using one important but isolated example, into extending the whole power of industry into the hands of the State is a totally "phoney"analysis.
We now have the Labour Party working away to bring its public sector investment appraisal to our banks. In defiance of all evidence and logic it is believed that the change of ownership of one or more of our clearers could change the climate of investment in Britain. That is wholly ill-conceived. The matter has been quite insufficiently researched. There is no evidence in the document to show that it should be done. Indeed, all the available evidence demonstrates that it would have totally predictable and unfortunate consequences.
The arguments about the insurance industry have the same intellectual validity. The motive is quite clear, namely, to control the investment funds. Once again, the arguments are based on exactly the same criticisms. About 250,000 people working in the insurance industry have now to wait and wonder, with all the uncertainties that that creates, whether one of their companies is to be selected as the reluctant bride of State husbandry.
I touch on one argument that applies to the control over investment funds that is in the hands of the insurance companies. It applies equally to the other institutional investors. The managerial revolution has divorced management and ownership in our large companies. The growing corporation has removed from management too much of the practical discipline of answerability from those who own the businesses.
The institutions, as the Diamond Commission on wealth clearly demonstrated, are the trustees of millions of working people. They are managing the savings not of a tiny privileged group, but, increasingly, the savings of the majority of people who live and work in this country. They are the trustees of the

savings, through the life insurance and pension funds, of the bulk of the British people.
There are about 2 million people who now own shares in their own rights. There are l3¼ million people with funded pensions, and 14 million life assurance policy holders. Increasingly at one remove the ownership of British industry is spreading throughout our society, yet the voice of those who act as trustees on behalf of the people is scarcely heard in the political debate.
It seems to be their naive view that the power-hungry Left can be diverted elsewhere if the profile is kept so low as to be virtually invisible. That is a total misreading of the position. Policy documents of the sort we are discussing would never see the light of day if the electorate associated its personal prosperity or assets with the suggestion that the State should take over the insurance industry or direct its savings through pension funds into unprofitable investment.
The British people are unaware that the Labour Party is proposing to get its hands on the assets upon which their personal savings and future are secured. It is that ignorance and the apathy that underlies it that allow the vacuum to which the Left so relentlessly march.
Not only should we expose these dangers; so should those who have power of which they have little dreamt. If only they will understand it and if only they will it, they have the power to argue in public for a democratic society. But if they will not, they can blame no one if their case goes by default.
Let us tell the lads on the shop floor that it is their savings that are destined for the Leylands, the Chryslers and other giants of State subsidy. Let them realise that it is their pensions that went down the drain along with their taxes. It is their savings that could be diverted into schemes of the sort with which the Secretary of State's name is so indelibly linked. That would bring about a total change in the attitude of those working in British industry towards the relative argument about ownership of that industry.
But it is not enough to expose the humiliating waste of national resources which I have just evidenced. If we want the workpeople to understand the direct personal interest that they have in the investment funds of the pension schemes,
why not elect them democratically to the management boards? I praise the free enterprise companies that have done that, but there are those companies that have held back. What are they waiting for? Are they waiting for a Labour Government to force them not to allow democratic elections to the various boards from the shop floor, to insist that they appoint representatives of politically motivated unions to do the same task with infinitely less good will.
Nothing would so focus the minds of those working in British industry who might hear whispers of impending State direction or control if they identified those threats with their own personal prosperity. In the context of the institutional investors, the issues have been rehearsed in the debate on the equity bank. If individual funds cannot and should not themselves try to involve themselves in too close a relationship with companies—and I know that they cannot—why is there not a representative organisation more attuned to a positive role than anything so far attempted? It is time that we genuinely applied the lesson of the German banks and the monitoring process over German management that they have carried out.
The moral of the story is that there should be a more positive rôle for the institutional trustees of Britain's savings. The way in which that should happen is evident to those who have considered the problem from a political point of view. Acting with the support, either pledged or in spirit, of the institutions, the equity bank could command the authority of a substantial part of the owners of a company and thus place alongside the negative control of share disposal an ongoing dialogue that could in some cases, and in some cases only, force questions to be answered before the ultimate collapse of declining companies provoked the all too familiar crisis.
I am not suggesting that such a dialogue would prevent some companies declining. I am not suggesting that there is an assumed obligation on the representatives of owners to bail out inefficiency or prevent long-term market changes. I suggest nothing more than that where companies are known to be indifferently managed, when the quoted value of the share price is its own warning about the future, it is

not enough to turn one's back and let the inevitable happen without a conscious decision being taken that that should be the case.
Lastly, I turn to the pharmaceutical industry, in which I declare an indirect interest. On 30th April the Minister of State, Department of Health and Social Security, gave a Press conference to announce the view that a major British pharmaceutical company should be nationalised. The hon. Gentleman explained that he was speaking not as a Minister but as a member of the Labour Party, and he expressed the hope that his proposals would be seriously considered by the pharmaceutical industry and the Press. They were. From one end of the industry to the other and from one end of Fleet Street to the other they were condemned for the doctrinal twaddle that everybody recognised them to be.
What kind of credibility do the Government expect for their industrial policies if, within the same few weeks, they produce a White Paper urging industry to invest, to make profits and to export, and then produce research documents blaming the banks for failing to provide investment that Government policies had reduced to the lowest levels since the 1950s, and then finally, a Minister pops up and says that he is only a member of the Labour Party, but suggests that the Government should nationalise part of an industry which has three times the national average productivity, which increased exports last year by 25 per cent. to £400 million, which provided one-third of the trade surplus of the entire British chemical industry and which, according to the British Medical Journal, supplies drugs to the National Health Service cheaper than in almost any other technically advanced country this side of the Iron Curtain?

Mr. Max Madden: What about La Roche?

Mr. Heseltine: La Roche paid its bills back to the State, which is more than can be said for a nationalised industry.
About 72,000 people in the pharmaceutical industry must now be in anguish over whether it is to be Boots, Fisons, Beechams, the Wellcome Foundation or ICI that waits for Lord Ryder to come a-knocking on the door. What an incentive for those companies to develop or for


overseas companies to invest here. And the Government wonder why the flight of talent is escalating and the resources available for investment fail to flow.
The Labour Party should spend a fraction of the time that it spends lecturing industry actually listening to industry about the conditions that it needs to stimulate investment. If the Government would ask "Why has investment succeeded so much more in competing economies?" rather than "How do we make people do what their best judgment warns them not to do?", they might evolve an industrial strategy which would live up to the Chequers phrases.
But in the fundamental debate between the two sides, to the Government the facts and figures are just crutches used to prop up the argument. The argument is as it has always been. It is about power—power, on the one hand. widely spread throughout a capitalist economy, with all the checks and balances involved in such a system, or power increasingly enmeshed within the confines of the State and the determination that power has to eliminate any independent competition.
Hon. Gentlemen opposite proclaim "for public consumption" at election time to give them a clear divide between the public and private sectors. The words had no louder advocate than the right hon. Member for Huyton (Sir H. Wilson) who proclaimed that confidence demanded that a clear frontier must be defined between what is a public and what is a private industry.
It will surprise no one that those words were used by the man who at various times had led Labour to power committed to the nationalisation of steel, sections of the pharmaceutical industry, road haulage, construction, machine tools, North Sea, Celtic oil and gas, shipbuilding, ship repairing, marine engineering, ports, airframe manufacture, and the establishment of a National Enterprise Board which was to be given power to nationalise any free sector manufacturing company in the country.
The faster the State acquired, the louder the clamour for a clear divide. The words are soporifics, designed to lull the apathetic and the idle into false complacency.
I therefore urge the House to support our motion and the warning that it so clearly contains.

5.56 p.m.

The Chancellor of the Duchy of Lancaster (Mr. Harold Lever): I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
believes that it is in the best interests of British Industry and the Nation that the Government should continue to develop its industrial strategy in accordance with the principles and objectives of the Industry Act; and welcomes the constructive contribution already. made to this work by the National Enterprise Board and the discussions on the Industrial Strategy at the NEDC".
I cannot pretend to have been a continuous or over-zealous attender of the House throughout my 31 years in Parliament, but this must have been the most extraordinary occasion in those 31 years. I have never heard an Opposition party devote a whole day's debate to the churning out of standard platitudes and of generalised political argument on the basis of some policy documents—discussion documents—of the party in Government that have been published for public discussion but have not yet reached the national executive of that party for discussion and approval. It surely is an extraordinary rodomontade to which the House has been treated, of standard and futile platitudes with not embedded among them a single constructive suggestion as to how the Opposition would deal with the economy.

Mr. Michael Marshall: rose—

Mr. Lever: I shall give way, but I should like to finish this part of my speech. In his glib and excessive articulateness, the hon. Member for Henley (Mr. Heseltine) swiftly glossed over the difference between the Government and the Labour Party. The hon. Gentleman contrasted the Government's view and said "How can anybody believe the Govenrment's view if one day they issue a White Paper and the next day they issue a policy document?"
The Government did not issue a policy document. The Labour Party has not, as yet, issued it as a policy document. It is a discussion document yet to be approved.

Mr. Michael Marshall: If this document is of so little relative importance,


will the right hon. Gentleman save the time of the House by repudiating it, so that we may move on to other business?

Mr. Lever: I shall call upon the hon. Gentleman for assistance in making my speech when I feel the urgent need for it. In the meantime, I shall struggle to deal with the Opposition case, if such it can be called.

Mr. Heseltine: The right hon. Gentleman said that these are not policy documents and have never seen the light of day as such. Will he comment on the speech by the Chancellor of the Exchequer, in which he said that the Government were working on an extension of public ownership into banking and insurance, and probably building societies as well?

Mr. Lever: I have not read my right hon. Friend's speech. I have an invariable rule never to be trapped into making comments upon partial, carefully selected quotations from the speeches that colleagues are supposed to have made. If the hon. Gentleman wants comments on that speech, he should put down a Question to the Chancellor of the Exchequer. I noticed that the hon. Gentleman, in the midst of a great deal of irrelevant trivia, did not make use of that quotation in the course of his extensive address to the House. It is clear, however—[interruption.] We shall see how much good use the hon. Gentleman made of it by the time I have finished addressing the House on Government policy. I am not here to comment on speeches, supposed speeches or selected quotations from speeches made by others. I have not read my hon. Friend's speech in detail.
The hon. Gentleman, when asked why he wasted the whole of the afternoon discussing discussion documents for inner argument within the Labour Party, as if they were Government policy, for the first time trundled out a snatch of what he claims the Chancellor of the Exchequer said at some particular time. If he would care to give me full notice of it, I should be happy to give him extensive comment on it. At present I am commenting on his own speech.

Mr. Michael Grylls: I have in my hand the document about the pharmaceutical industry. There is nothing on it about its being a dis-

cussion document. It is headed "News Release". It refers to public control of the pharmaceutical industry, but says nothing whatsoever about its being a discussion document.

Mr. Lever: This was published quite openly by the Labour Party as a Press release for public discussion and discussion within the party, and decision. I am sorry if the hon. Gentleman—who is not, as far as I know, a member of the Labour Party, feels badly done by in the way in which it was released to him or the Press.
The important matter that the House should notice is that we have been treated to this tirade not on the basis of anything that the Government have said or done but on the basis of a lengthy policy document that has been published openly by the Labour Party for the information of its members and the public. One is forced to ask why this tirade was launched upon us. It is perfectly plain that the Tory Party, being entirely without any constructive policy, is anxious to interpose a smoke-screen of demagogy between its political nakedness and such support—diminishing support—as it is getting from the public.
The same extraordinary speech included an apparent unqualified hostility to every aspect of publicly-owned industry. That in itself gives me some indication of the distant date on which the Conservative Party has expectations of resuming Government, because no Government can organise the industries of this country without a proper regard for and interest in the publicly-owned sector as well as the privately-owned sector. The philistine, vulgar and unqualified hostility that was displayed to every aspect of public ownership is disgraceful, coming from the mouth of a man who has held public office and hopes to hold it again. He has threatened hon. Members on the Government side of the House in saying that there is a great emigration of talent. We, looking, as we are forced to do, at the Opposition Front Bench, do not need a great deal of persuasion on that point, if that is the kind of argument being advanced.
I have a certain respect for the old-fashioned view—the old Tory view—of generalised hostility to any form of public ownership—a sort of hangover from or misreading of Adam Smith. But I do not respect it when it comes from people such


as the hon. Member for Henley, who have held office and operated publicly-owned industries and who have every hope—though not too much expectation—of holding public office again and having the same responsibility.
I now deal with the realities as opposed to the absurdities of inviting the House to pass judgment upon policy documents which have not even yet received complete discussion within the political party that has issued them.

Mr. Angus Maude: It might save the right hon. Gentleman a lot of time if he noticed that the Opposition's motion does not ask the House to pass judgment on a policy document but asks the Government to answer a few questions in order to remove uncertainty about the future of three industries.

Mr. Lever: I am coming to that. [Interruption.] Far from not noticing I shall point out that there is no such uncertainty in the minds of Opposition Members. This is a bogus provoking of uncertainty in the hope of gaining political advantage from it. The Government's policy on these issues is crystal clear. It is well known—even to the modestly literate members of the Opposition Front Bench.
First, let me deal with banking. I can give a complete, simple declaration that the Government have no intention of nationalising any company in the banking industry. [Interruption.] It is no good saying "Very good". All this has been said. I well understand the purpose of the motion. It is that a bankrupt political party hopes to gain some political advantage by stirring up a kind of bitterness between some of my hon. Friends and the Government where there is a very genuine and reputable difference of opinion between us. Where there is no difference of opinion between us is in a determination to make a success of our existing nationalised industries, and wherever it is advantageous to the public interest, to extend public ownership.
None of us regards public ownership as something evil—to be reviled, jeered at and sneered at in the way we have heard this afternoon from a former Minister. I do not deny that there are some Labour Members who would very enthusiastically

welcome the nationalisation of one or two banks. However, that is not the Government's policy, and the hon. Member for Henley knows full well that that is so, because it has been said over and over again.
The former Paymaster-General, who is now a member of the Cabinet—which is hardly punishment for his sin—stated in the clearest terms on 2nd June 1975 that we had no plans to nationalise the banks. In fact, it is the Government's view that our banks are a very efficient sector of our private enterprise. They are competitive. Our branch banking system is unrivalled throughout the world, and our banks adjusted to Britain's changing position in the world with remarkable advantage to our country. They continue to make a major contribution to invisible earnings.

Mr. Fernyhough: I am sure that my right hon. Friend would readily agree that many investors in the fringe banks would have been very glad if the Government had nationalised those banks and, likewise, that many of those who invested during the last two or three years in insurance companies which have gone bankrupt would have been very happy if the Government had nationalised them. At least, I had many letters saying that the Government should do that.

Mr. Lever: I am sure that anyone who has invested in a private enterprise company that fails would be very happy if the Government relieved them of their losses by taking over the company concerned. However, I am sure that my right hon. Friend would not regard that as the purpose of nationalisation.
We are talking of the banking industry as a whole. It has been a great success and of great advantage to our country. Our insurance industry also has an enviable world position. In 1974 its export earnings were £370 million. It brings in other business—for example, ship broking and ship repairing. Much of its strength derives from the fact that foreigners know that it is independent of Government. Whether or not hon. Members like it, that is a fact. Many American States will not allow an insurer to be licensed if he is owned or controlled, wholly or in part, by a foreign Government. Here, too, the Government have no plans for nationalisation. Only the fraudulent eyebrows of the Opposition
Front Bench will be raised in astonishment at that. This is well known by those of my hon. Friends who wish that we had such plans, but they know perfectly well that we do not.

Mr. Heifer: My right hon. Friend is absolutely right in saying that the present Government have no plans to nationalise banks, insurance companies and financial institutions. However, he must be aware that in the last analysis it is the party that will decide for future Labour Governments. While it is accurate to say that it is not in our present manifesto and that we are not committed to it, it does not follow that we shall not be committed to it in the future. My right hon. Friend must also be aware that there are many of us within the Labour Party who, although Opposition Members are trying to stir up differences between us, are talking in terms of the future and not the present plans of this Government. I am sure that my right hon. Friend is aware that many of us in the Labour Party—I would say it is the majority in the party—do not believe that we can get that irreversible shift of power to working people and their families—not to the State—that is advocated in the Labour Party manifesto without ultimately controlling the banks and financial institutions in order to get the investment and the necessary planning of our society's resources where they are required.

Mr. Lever: I am extremely amused at the way in which the Opposition appear to pretend, and apparently are able to convince themselves, that it is a novelty that my hon. Friend has his view and I and the Government have a different position in relation to these matters. What my hon. Friend is saying is perfectly fair. He is saying that he has his hopes about the way in which political developments will go in the future. But other people have different hopes.
I am not going to be lured from policy to prophecy; I am talking about the Government's policy as it is. I am not talking about what my hon. Friend may hope or what I may hope. Although we have many hopes, both for our country and the party, our hopes are not in total coincidence on this point. However, that is not the question.

Mr. Hefter: That is well known, I think.

Mr. Lever: I gather from my hon. Friend's comment that this has not hit him with the shock of novelty. I do not need to spell out the virtues, on the positive side, of our banking and insurance system, although I might claim rather better qualifications to do so than some hon. Members opposite.
What the hon. Member for Henley has not dealt with, I propose to deal with. I hope that I shall give some satisfaction to the House, and my hon. Friends in particular, in relation to the serious question that has come up. My hon. Friends are not complaining that the young ladies at the counter of the branch banks are not up to scratch, or that bank managers are tipsy, or anything of that kind. They are asking whether our banking and insurance system meets the needs of our modern society which commits to it a greater part of its investible funds, and whether those investible funds are deployed, under this system, in a way which is satisfactory to the needs of our society.
The Government have no intention of abdicating responsibility for ensuring that the huge funds, within the banking and insurance system, are deployed in accordance with the needs of public policy. But the Government can, without difficulty, do this without any nationalisation of the banks or the insurance companies. The Government operate their monetary policy with complete freedom and effectiveness without owning the banks. They are able to have, in the most flexible manner possible, the monetary policy of their choosing. We do not need to own the banks to achieve this.
We have the most extraordinary example of the flexibility by which the Government operate their policy in a privately owned banking system—for example, the special deposits, by means of which hundreds of millions of pounds are given up voluntarily by the privately owned banks, in many cases without any interest at all, and in all cases at an interest below the market rate because the Government have said that this is the requirement of the Government's monetary policy and, rightly or wrongly, in the interests of the country. The banks have never had to have one piece of


legislation to compel them to do this. Nowhere in the world can a parallel be found for this flexible, responsible control by private ownership of the banks which are responsive to Government policy in this way.
The problem is not how to control the banks with Government policies but rather to ensure that the Government policies they are asked to carry out are wise. The real danger is not that the banks remain in private ownership; the danger is one of the banks coming under a policy dictated by a Tory Government. The cure is not nationalisation, but the minimum of Tory Government, not least because I am not sure whether the Tories are worse when they are making mistakes or when they are trying to correct them. I am not sure whether the Barber mistakes or the overkill promised in the opposite direction by the right hon. Member for Leeds, North-East (Sir K. Joseph) and others is the more dangerous or whether the kind of remedies and attitudes displayed from the Opposition Front Bench today are the remedies for the kind of profligate behaviour to which we were treated by the previous Tory Government. It is a horrifying choice between Barber or the hon. Member for Henley. What an excruciating choice to offer to the people of this country—the disease or the doctor. It is difficult to know which is the more dangerous of the two.
But are our banks, insurance companies and pension funds so concerned with profit that because of this they fail to invest in industry as they should? In our society profitability is not a perfect yardstick for allocating resources although, in general, it is pretty good, as its results show whenever it has been applied. It is certainly better than the combination of whim, intuition and prejudice which will replace it unless one sets clear criteria for the control of funds. Where one wishes the funds to be allocated otherwise than because of profitability, then the obligation is upon us to give a clear alternative criteria.
For the private enterprise system there is no doubt in my mind that the best criterion we have is profitability. I shall deal with the necessary supplement to that in a moment. It is a pity, in some, ways, because it is harder to find people who can make profits than it is to find people who can make losses. I wish a

simpler system for the allocation of resources could be found.
Where supplements are required to the market profitability test—there are many occasions where this Government feel that the market profitability test is not adequate to provide the country with the investment it requires—the correct way of approaching that is not to dragoon the funds within the banking or insurance system by Government direction. The correct way of dealing with this is by appropriate institutions like the National Enterprise Board, the Industry Act and Giro, which are disliked by hon. Gentlemen opposite. These are the methods which the Government must employ if they want to abandon the market profitability tests.
When they direct funds in this way the Government must, in doing so—as they have always done—apply strict financial criteria within which these institutions are to operate so that one has a mixed economy system, which this Government are developing, in which the private sector uses private sector funds at market criteria. However, we are not so complacent as to believe that this is the be-all and end-all of investment, and we have organised substantial additional funds, and no doubt will organise further funds, to supplement the market profitability tests. These further funds will themselves be subject to the appropriate strictly defined criteria for operation.
The hon. Member for Henley has said how inadequate these Government arrangements are. He will meet a warm response from some sectors of the Labour Party, who want larger sums allocated to the NEB. I am sure they will have noted his view that the sums we have so far allocated are quite inadequate. The basis on which he said that they were quite inadequate, was the entirely dishonest, untrue statement that the Government purport that these sums are in substitution for the private funds. That is absolutely untrue and the hon. Gentleman must know it. It is absolute rubbish. The hon. Gentleman must know that the Government are not deaf and blind. The Government are perfectly well aware that in the last 12 months, private enterprise has raised on the Stock Exchange alone about £1,500 million by capital issuȩs. The Government are perfectly well aware of this and have encouraged by


all means in their power the raising of money by loan stock.
I wonder what the hon. Gentleman thinks the Government were about when they took stamp duty off loan stock, which his commercially-minded Government failed to do, to encourage capital to flow into industry. Either the hon. Member is seeking to mislead the House or he has a naivety in these matters which surprises even me if he believes that the Government have put forward the NEB as a substitute for the private arrangements for providing capital for industry. As the hon. Gentleman well knows, or should know, the Government put forward the NEB funds as a supplement to the market funds which are available through the banks, insurance companies and private investors.

Mr. Heseltine: Unlike the right hon. Gentleman, I have read and listened to the speeches of so many of his right hon. and hon. Friends, and I know that they see the techniques of State support as a substitute for the present methods of private funding. I appreciate that the right hon. Gentleman does not take this view, but he is an anachronism in his party, as everyone knows.

Mr. Lever: I may be an anachronism in my party or the House or elsewhere, but that is not the point that I was seeking to make. The point that I was seeking to make, which, with great facility, the hon. Gentleman seeks to avoid or evade, is that he did not say that Ministers have indicated in their speeches that they want this or that to happen. He said that these funds of the National Enterprise Board are supposed to be a substitute for private funds for industry. He must know that that is juvenile nonsense. Unless the Government are both deaf and blind, they have been well aware, and have rejoiced publicly at the fact, that we have this year been raising record funds for industry—under a Government who are supposed, incidentally, to be intimidating the private sector from any kind of investment activity because of the nasty overhanging threat of these policy documents.
The hon. Gentleman might have explained, incidentally, the potency of the threat of these policy documents—in view of the amount of new capital which has been raised in the last 12 months

under this Government, thanks to their successful accord in the trade union movement, more than any single other factor—in restoring the confidence of private industry. He might try to explain why, under his competent Tory Government, who mouthed all the agreeable platitudes approved by maiden ladies in Cheltenham, we got no investment on this scale, while, under this horrific, destructive, negligent, incompetent and near-Bolshevik Government, the money is pouring in in rights issues at a record pace to finance the great industries of this country. Perhaps the hon. Member, who wants to raise minor points when I am correcting his distortions, will treat the House to an explanation of that in his next speech about Labour Party policy documents.
That does not mean, of course, that there are not mechanical defects in the banking and insurance system that have developed as society has changed and new problems have arisen. We are proud that the neglected problem of medium-term finance for industry was tackled by this Government, by the Chancellor of the Exchequer, when, with the full support of the Governor of the Bank of England and the clearing banks, we set up FFI as a pilot exercise and a stimulus to medium-term lending for industry.
In doing so we had in mind the fact that the supply of medium-term finance for industry had evaporated from its normal source—the private investor. With inflation, the private investor was not willing to commit his funds at fixed interest for long terms, and action was required by an intermediate institution to make good that evaporation. We got FFI going to encourage the commercial banks to extend their medium-term lending to industry, and we have had remarkable success, despite the "intimidation" of my hon. Friends and the hobgoblins who haunt these Benches and Transport House.
The London and Scottish clearing banks have now put out in medium-term sterling loans to manufacturing and other productive industry about £2¾ billion, compared with ¾1½ billion in the burgeoning confidence that existed, as we all know, under the Tory Government.

Mr. Heseltine: Pure inflation.

Mr. Lever: Pure inflation? The hon. Member's statistical information must be as bad as his other information if he really believes that the increase in the medium-term bank lending in those two years can be accounted for by inflation. If he will take the trouble to get the bank briefing that he appears to have had only partially, he will find that they will not agree with him. They will tell him what I am telling the House—that there has been a remarkable advance in the concept of medium-term lending, by the banks to productive industry. The Government have encouraged it.

Mr. Dennis Skinner: Can my right hon. Friend get away from all these fancy figures and his Finance for Industry, which to a large extent has been a failure after all the promises when it was announced, and the £6 pay limit, which was supposed to increase investment and reduce unemployment? Taking into account everything that my right hon. Friend has said and the fact that the improvement supposedly exists on paper, why are we still struggling with the highest unemployment levels since the end of the war? What will these paper promises do about that? That is the question he has to answer.

Mr. Lever: I cannot intrude too long in this debate on this point, but I will say briefly that one cannot transform a world slump and its consequences, just in our country, overnight. My hon. Friend must know that the pay policy, the £6 limit and the latest advance on it, are fairly recent and that there is a time lag before all this investment and the assault upon inflation pays dividends in Government strategy. However, he may be absolutely sure that the Government are bent on mastering inflation and unemployment. The facts that I have given are clear indications that this process is succeeding.
I want to say something now about directed investment from institutions—pension funds, insurance companies and the like. The hon. Member for Henley talks as if it is the established policy of the Government to conscript investment funds from institutions for investment in either public corporations or private enterprise. He seems to be such a keen student of ministerial speeches that he cannot have failed to have had brought to his notice, especially for this debate,

my own speech at the opening of the Cooperative bank recently, where I made it expressly clear that this Government did not countenance in any way the direction of investment funds in the way which he says we are threatening the country with.
There are reasons for this, and I gave them in my speech. First, I said, there is no reason to coerce funds because they can be obtained voluntarily. This has proved to be the case. The second point is that, if one wishes to take funds out of the jurisdiction of market profitability and place them, for social reasons, elsewhere, as I have said on many occasions we must, one must not put at risk the savings of working people in the pension funds.
It is no good the hon. Member for Henley smiling. I did not wait for his absurd, juvenile and immature speech this afternoon to say that. I said it in public and it was reported in every newspaper in the country, as he knows.

Mr. Heseltine: Did they approve?

Mr. Lever: It does not matter whether every one of my hon. Friends approves. The hon. Member is treating the House with less than candour when, knowing that this is the Government's policy, he does not say so in this speech. He knows that, after I made that speech—whether some people liked it or not—the Prime Minister was asked whether it represented Government policy. The answer was an unqualified "Yes", by the former Prime Minister, my right hon. Friend the Member for Huyton (Sir H. Wilson). The hon. Gentleman knows that perfectly well and he has no business to pretend to the House that Government policy has any other flavour than that.
There is another reason, which I also gave during my public speech. We do not want a hybrid organisation that escapes the rigours of commercial profitability and yet lacks public sector accountability. We want private sector accountability of profits and public sector accountability where public funds are disposed of.
My hon. Friends have not concluded their thinking on this matter. If they think it over, they will not want to penalise working people's funds by subjecting them to an investment restraint that will not apply to the rich. Working people put their money in banks, building


societies, pension funds and the like, and they expect their money to be accumulated with prudence and skill. There is no reason which I could support for giving working people unfair treatment in the use of their funds compared with the rich, who are able to invest them directly.

Mr. Sedgemore: Is my right hon. Friend saying that it is in the interests of working people that if capital goes abroad or into profitable non-manufacturing use in this country, provided that their savings are maximised it does not matter if economic growth is minimised?

Mr. Lever: I said nothing of the kind. My hon. Friend appears not to realise the defectiveness of finding a remedy either for excessive investment abroad or for inadequate or misdirected investment in penalising the workers' pension funds. The remedy lies elsewhere. If capital investment abroad is excessive, the remedy lies in proper exchange control. If it is not possible through the normal processes of profitability and market attraction to get funds for production in the places where it is needed, the remedy is in the Industry Act and the National Enterprise Board, which must have the necessary funds to enable it to operate. What is not a remedy, and what I could not possibly support—[Interruption.] If my hon. Friend wishes to make an intervention, perhaps he will do so in an audible form.

Mr. Skinner: My right hon. Friend keeps harping on about the virtues of the establishment of the NEB and the need that presumably goes with it to provide it with a great deal more money than the Government are prepared to grant. Will he tell us what kind of money he thinks the NEB should have to enable it to carry out the social programmes that he is telling the House it should be doing?

Mr. Lever: The NEB is at present endowed with all the funds it requires to meet the identifiable and justifiable purposes I have outlined. Should the Government be satisfied that more is needed, more will be provided as and when it is required. In our view, there is no shortage of funds for the NEB for all the purposes for which it can legiti-

mately demand funds. Having disposed of the —

Mr. Skinner: —National Enterprise Board.

Mr. Lever: I have not disposed of the National Enterprise Board; I have allowed the Government to decide. My hon. Friend might find it difficult to swallow. We would all prefer to be the Government. I should like to be a one-man Government, although I do not like my colleagues to know that. In default of being a one-man Government, I work happily on the collective decisions that are made, which I accept, although not all of them are to my taste, any more than they are to my hon. Friend's taste. My hon. Friend must not think that it is disposing of the NEB to say that huge sums of money have been allocated to it with the promise that any further money that is required for the identifiable, justifiable and appropriate causes of the NEB will be provided when time shows it to be required. It may not be as much money as he would think right, but it is as much as the Government think right at present. There has always been a certain difference in emphasis between my hon. Friend's views and mine and even, dare I say, between my hon. Friend's views and the views of the Government, of which, in general, he is such a keen supporter, although not a supporter of the Government, so far as I have been able to ascertain, at any particular point.
We already dominate the commanding heights of the economy—the banks and the insurance companies. We do not need to occupy them as well to ensure that our policies are effective and our ideas are put into practice.
I shall deal briefly with the pharmaceutical industry. Here again, the Government have made plain that they have no plans to nationalise any pharmaceutical company. Here again, a very interesting document has been put out by the Labour Party. The Government recognise, as does the Labour Party, that in this field there are very anxious problems concerned with protecting the public interest from monopoly exploitation and the like. We also recognise the remarkable achievements of the pharmaceutical industry in export and research. One of the proposals contained in the


Labour Party discussion document is to nationalise one major company. It is a proposal, but it has never been discussed and it has not become party policy, still less Government policy. That is a perfectly legitimate discussion document.

Mr. Heseltine: Perhaps I can help the right hon. Gentleman by reminding him that the proposal appeared in the February and the October Labour Party manifestos on which he was elected.

Mr. Lever: I am very happy to hear that that is so, but although I must confess that I read mainfestos, the commitment to nationalise a pharmaceutical company in unambiguous terms, to the best of my recollection, is not part of any manifesto. I shall certainly look into the matter and refresh my memory. If it is in the document I accept it as being manifesto policy, but I cannot trust the hon. Gentleman as an interpreter of a party document after the rash and ambiguous way in which he has dealt with party discussion documents. The latest document was the one to which he was referring, and it is the one to which I am referring.
The Government have no proposals to nationalise any pharmaceutical company. What they have, however, is a continued and anxious drive to achieve the purposes of this document, namely, to protect the public interest in this field from monopoly, exploitation and distortion of prices. I can say only this about the latest proposals in the discussion document—I thought that was the one to which the hon. Gentleman referred—

Mr. Heseltine: indicated dissent.

Mr. Lever: The hon. Gentleman said that the discussions were chaired by a Minister of State. That is the document to which I am referring. The Labour Party manifesto comments on this subject were not made in discussions chaired by the gentleman in question.
The purposes of public protection are very much in our mind. This document will prompt us to redouble our efforts in discussion with the industry to ensure that the powers we already have are sufficient to provide the necessary protection of the public interest.
I have, in effect, told the hon. Gentleman—I am sure not to his surprise—in categorical terms that the Government have no intention of nationalising com

panies in banking, insurance and pharmaceutical manufacturing. Although the hon. Gentleman professes surprise, he might care to intervene yet again to tell us why he wishes to pursue the motion further in view of the statement I have made on behalf of the Government. While he is pondering that, I shall briefly move to the Government amendment. I am sorry that the neat amendment tabled by some of my hon. Friends was not called. It is terse and effective for their purposes, and would have given a much more interesting basis for debate than the Opposition motion.

Mr. Heseltine: As the right hon. Gentleman has not read the Labour Party manifesto, perhaps I may put it on the record. The February manifesto is quite clear. It says:
We shall also take over profitable sections or individual firms of those industries where a public holding is essential to enable the Government to … protect workers and consumers".
All that sort of stuff. Then the sections are listed and the list includes "sections of pharmaceuticals ". The October manifesto, referring to the February proposals, said:
We stand firmly by those proposals.

Mr. Lever: That shows how right I was to be cautious and not to rely on the hon. Gentleman's interpretation of the Labour Party manifestos. I do not think that the hon. Gentleman is being deliberately dishonest, but what he said a moment ago does not tally with what he has just read. He said a moment ago that the commitment to take over a major firm in the pharmaceutical industry was a commitment of both Labour Party manifestos. That is absolutely untrue, on the basis of the piece that he has read to me. The hon. Gentleman must read it again, carefully. I did not come here to listen to repetitive readings of the Labour Party manifestos of February and October 1974. The hon. Gentleman has misread the manifesto. I have not misread it in the way he seeks to suggest.
I now turn to the Government amendment, in the light of the absurdity of the Opposition's position today. They claim that there is a great nightmare hanging over the country's industries. The motion implies that a reassurance, by way of a declaration from the Government, will remove that supposed threat and anxiety.


The hon. Member for Henley has had that assurance, so why does he not ask leave to withdraw his motion? He has not done that. He is more preoccupied with attempting to put a dishonest gloss on previous Labour Party manifestos. I read the manifesto, and I do not attach the same meaning to it as the hon. Gentleman does, but I am not going to engage in a dialectical dispute on the interpretation of the document, sacred as it may be to the hon. Gentleman and to many of my hon. Friends.
On behalf of the Government I declare that our true and real position is stated in our amendment. The Government position is that we believe in a mixed economy. When I say that, I mean that we also believe in the achievements of our publicly-owned enterprises. We greatly resent the slur upon their management, the cheap jeers directed at them, and the fraudulent arguments used for their disparagement by the hon Member for Henley. The hon. Gentleman should bear in mind his own statement that efficiency cannot be tested when profits are restrained. He spoke of nationalised industry as an incompetent, profligate, wasteful and unwholesome piece of the body politic because it does not make profits. His Government, and every Government, have constrained the profits of nationalised industries. But when they are allowed to operate commercially they have a great record of success and achievement, of which the country should be proud.
It is an extraordinary posture for one who claims to speak for the Shadow Government to disparage massive publicly-owned enterprises in an unqualified, unjustified and unsupported way. We believe in our public enterprise, in a successful and alert private enterprise, and in a mixed economy. We see the way forward by an industrial strategy based on co-operation between Government, workers and employers, with give and take on all sides and self-discipline in the exercise of freedom and power. Our problems can be solved only by an approach that enlists the consent and support of the majority. Under our policy no one gets total satisfaction, in the sense that accommodation must be reached. I am not ashamed that there are no victors to crow, because there will

be no vanquished to plan a return match and damage our economy. We organise not confrontations but constructive accommodation, which will result in restoring prosperity to our country.
No doubt we shall make mistakes, but we shall get nothing constructive from the Opposition. Their attitude is irrelevant. They are the party of the public relations try-on, without a policy of their own and with a rather shameful attitude towards the achievements of the Government and the people of this country. Their worst attitude is shown in their reaction to the achievements of the Chancellor of the Exchequer, and others in the Government, on incomes policies. They are critical of the achievements of our trade union leadership in recognising the needs of the country and in being willing to sacrifice their cherished freedoms to help in a policy to bring an end to the inflation which is perplexing and injuring our prospects.

Mr. Sydney Bidwell (Ealing, Southall): It has never been part of the trade union case to oppose high profit in the private sector of industry, but it will continue to be a major aim of the trade union movement to challenge the distribution of such profits. It will always be part of the movement's policy to extend the sphere of public ownership.

Mr. Lever: Those are legitimate objectives. All I was saying about the trade union movement in connection with recent policy was that it involved a considerable sacrifice of the unions' cherished freedoms. That has produced a characteristic response from the Opposition. They have sought to say that this is proof of trade union diktat and part of the Government's surrender to the dictation of trade union bosses. When that argument fails, we shall hear little more about it. We do not intend to be deterred; we intend to go on with our concept of a mixed economy, ever-increasing the prospects of social justice, and the hopes of our people for a better life and society.
I therefore invite the House to reject with contempt the absurd demagogic motion and to support the Government's policy as urged in the amendment.

Mr. Speaker: Before I call hon. Members to speak I must remind the House that we have only two hours and


12 minutes for Back Benchers to take part in the debate.

6.48 p.m.

Mr. David Steel: This is an immensely enjoyable but at the same time irritating debate. It has taken a long time to get through the two Front Bench speeches, which I admit to have enjoyed. But I wonder what I am doing here. It has been a perfectly acceptable debate for the Oxford or Cambridge Union, for radio or television, for a party conference or a General Election, but I was not sent to the House of Commons to debate the internal discussion documents of the Labour Party, the Conservative Party or even the Liberal Party.
My hon. Friends and I regard this day as a waste of good parliamentary time. We cannot understand why the Opposition have chosen to use the day in this way. I am here because my colleagues felt that something should be said about nationalisation on behalf of the Liberal Party. They decided that I should say it, and in the current situation I did not dissent from that. It is great fun to expose the defects in the Labour Party, but there are other opportunities for doing that. This should not be one of them.
Since the end of the last war, the public has become rather bored by the long debate about the merits of public versus private enterprise. The blunt fact is that the dog-fight on nationalisation, the arguments for and against, and the different policies of succeeding Governments since the war, have played absolute havoc with the long-term management of our economy. Perhaps one of the best examples among many is the most recent one of civil aviation. But the most clearly established is the example of the steel industry, nationalised by a Labour Government in 1950–51, denationalised by a Conservative Government in 1953, and renationalised by a Labour Government in 1966. After all that, we throw up our hands in horror as a nation and wonder why our steel industry is less competitive in real terms than those of other countries. The answer is that if we mess around with the top management and long-term planning of an industry we cannot be surprised if we end up with one in which output per man is very much lower than in other countries and one which is less well organised.
Therefore, I would say on behalf of my colleagues that the most important way to move forward this public debate is to seek a consensus on what we define as the mixed economy and what are the boundaries of the public sector and the private sector. We should then produce policies conducive to the optimum management of both. I believe that both have their part to play.
It is no good the hon. Member for Henley (Mr. Heseltine) pretending that the Conservative Party approaches these matters in a totally dogmatic and purist way against nationalisation. Every Government may have occasion to take a particular industry or firm into public ownership for very good current, pragmatic, economic, defence or other reasons. But that is a different matter from messing about with the basic boundary between what should be in the public sector and what is more efficiently organised by the private sector.
It does not make sense for the present Government to go on talking about a new policy for reinvigorating industry if there is a threat hanging over investment policies in the form of a possible future policy that might be adopted by the Labour Party in government. The Government have extensive legislative and taxation powers to control the private sector. That is particularly true of banking. Under the Bank of England Act 1946, both Governments have had powers to direct the lending and investment of the banks into particular industrial schemes—powers that have not been used or have not been used to the full. Therefore, to discuss the merits of taking into public ownership the banking and main financial institutions is an interesting academic exercise but no more. It is not a political reality.
Today's debate would have served a useful purpose if it had been devoted to considering what we might have done with the public industries, to considering the lack of experiment in the industries under direct Government control in terms of industrial partnership. There has been a sad failure of public enterprise in that direction. It could have been used for more fruitful experiment in democratic control, employee representation on boards and co-operative management at plant level. I hope that one day we shall debate that sort of topic. To go on


with the old party dog-fight, exchanging slogans of past General Elections across the Floor, is not a constructive use of parliamentary time.

6.54 p.m.

Mr. Max Madden: When I heard that the Opposition were to offer Supply time to discuss nationalisation and public ownership I believed in my innocence that it would be an opportunity to discuss such matters seriously. I was distressed when I saw the terms of the Opposition motion, which merely draws attention to the possible public ownership of a limited number of industries and does not examine the wider issues, which are extremely important, and which include some of the matters referred to briefly by the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel), the Liberal spokesman.
I realised this with even more disappointment after reading a report in The Guardian on 15th May by a very reliable Scottish journalist of the speech by the hon. Member for Henley (Mr. Heseltine) to the Scottish Conservative Conference in Perth. It seems to have been an extremely lively and interesting conference. The journalist, Mr. Kerr, reported that in a debate on nationalisation and public ownership the hon. Gentleman
In a neat manoeuvre to accommodate the spirit of the motion, which some thought too weak, and the amendment, which others thought too strong,…urged the conference to vote for both. The purpose of the conference, he said, was to reflect the gut reaction and grass roots feelings of the party, not to be concerned with the problems their views might create for a future Conservative Government.
He said: 'When the amendment calls for a long-term programme of denationalisation, you vote for it because that is what in your hearts you want to see. Let me worry about the political and practical difficulties.' Warming to the response from the floor, he went on: 'You fight for what you want and you will be surprised at how much more of what you want you get.
The hon. Gentleman is fast acquiring the reputation of the Tarzan of the Conservative Central Office, swinging from compromise to compromise. He obviously set the Scottish Conservative Conference, which I expect until then was a rather tame and timid affair, alight with such fighting talk. One formerly tired and

unhappy party worker was forced to tell Mr. Kerr after the conference.
I came to Perth this year depressed and pessimistic about the state of the party, but I feel a whole lot better now. With young men like that, we cannot lose.
Therefore, Mr. Deputy Speaker, you will understand my disappointment that the hon. Gentleman has let those people down today. Only five days after that conference, his motion is a mild and limp affair, which asks the Government to resolve uncertainty about the possible nationalisation of a limited number of firms. There is not a word or even a hint about what the Conservatives would denationalise if they had the opportunity. There is not a word about what they would return to the freedom of the market and to the people. I am sure that Scottish Conservatives will be extremely disappointed by the motion.

Mr. Alan Lee Williams: They may even be relieved.

Mr. Madden: My hon. Friend may well be right.
If the Conservatives do not have much confidence in future denationalisation, let us look at the past. Let us see what previous Conservative Governments have denationalised, what they have taken out of public ownership to return to private enterprise. I am glad to see the right hon. Member for Bournemouth, West (Sir J. Eden) here, because he was accompanied in a previous Conservative Government by the hon. Members for Cirencester and Tewkesbury (Mr. Ridley) and Honiton (Mr. Emery), who were hellbent on denationalisation, on hiving off the profitable sections of certain nationalised industries and returning them to private enterprise. For those who, like me, worked in publicly-owned industry then, it was an extremely disquieting episode.
I believe that as a result of that extremely unhappy saga the Tories have learned their lesson. They have not mentioned denationalisation so far today. Perhaps their Front Bench spokesman will tell us later whether they are to denationalise, as the Conservative Party was told at the weekend. What will the Conservatives denationalise? What will they return to private enterprise?
We have begun to face reality and to recognise that there is a private and a


public sector. The public sector is large, but represents only 20 per cent. of the economy, with the remaining 80 per cent. forming the private sector. The mixed economy is heavily mixed in favour of private enterprise. We must accept that the public sector is here to stay. I hope that in replying tonight the Secretary of State for Energy will address himself to some of the serious issues that concern me as someone who supports public ownership and wishes to see it extended. The issues on which I hope we shall concentrate in what remains of this debate are the important ones concerning the relationship of the public sector with government. We have to resolve what that relationship is. We must reconcile the responsibilities that lie with Government and those that lie with the public sector.
Is there to be direction by Government over the public sector? What opportunities are there for interference by Ministers in the affairs of the public sector? Do we want the heads and senior managers in our public sector to be obedient functionaries, who will observe Government directives to the letter, or do we want aggressive entrepreneurs who will vigorously pursue commercial policies? The most important question is how can we reconcile the commercial objectives which have been set for the public sector with the social responsibilities which traditionally and historically it has to observe. I worked in a publicly-owned industry and I can appreciate the great difficulties which the reconciliation of commercial objectives and social responsibilities impose upon organisations within the public sector. These issues cannot be burked.
The second important issue which has to be faced—and I hope that we shall hear something from my right hon. Friend about this—concerns the relationship which should exist between managers and employees within the public sector. It is difficult to discern that that relationship in many of our public sector industries is substantially better than that in the private sector. I am forced to say that in many cases the relationship is far worse in the public sector. Most of the major, large public sector industries were brought into public ownership in the early and middle 1950s. It is a Morrisonian

structure which has not changed substantially in the years since.
We must now begin to review the structures and arrangements within the public sector. We should be looking at appointments and at the possibilities for elective positions at all levels within the public sector. We should also look at opportunities for enhancing industrial democracy within that sector. It is this sector which should be the spearhead of progress. It should be leading the way. What is happening in the public sector to this end?
The other important issue what we ought to be discussing in debates on the public sector is the relationship between industry and consumers. The number of consumers and the complexity of the operation which dominates the public sector is enormous. I hope that no one will attempt to dismiss the level of efficiency which is reached by most public sector industries. It is extremely high. Because of the enormous numbers of consumers and the high percentage level of performance, when things go wrong they go wrong in impressive numerical terms, affecting large numbers of people.
We must also remember that the Press is extremely keen to highlight problems which occur within the public sector affecting consumers. It is not so keen—and I speak as a former journalist—about highlighting problems which arise in the private sector. How many of us have suffered enormous difficulties with garages, TV repairs, electrical services of all sorts—all in private hands? It is difficult to get attention and it is still more difficult to get redress, or any support from the Press in dealing with those problems.
Consumer councils which were originally set up to represent the consumer interest in the public sector are largely ineffective. They occupy a shadowy role which is becoming a matter of increasing concern. They should be wholly independent. They should be adequately staffed and financed and separate from the industry over which they are supposedly watching. They should certainly be more available in each of the localities in which they operate. Their officers and supporting staff should carry much more weight than they do when attempting to repre-


sent consumer interests to management within the public sector.
The Select Committee on Nationalised Industries should take a much greater interest in the consumer affairs of the public sector. The Committee could do much to highlight these matters and to secure effective action. It is no longer a matter of dispute that we are experiencing enormous difficulties. For anyone to pretend that these difficulties have arisen merely since 1974 when a Labour Government assumed office is a naive assumption that is becoming less and less tenable for anyone to hold.
There is an enormous cross-section of agreement within industry, between management and employees, in seeking to tackle the problems we face. These people believe that the only commonsense and rational way of tackling our problems is by planning. The planning exercise currently under way within the National Economic Development Council—whereby there are 30 or 40 working groups, each made up of representatives of all interests in a particular section of industry, which are to report at a one-day meeting of the Council in July—is the beginning of a planning exercise which holds promise. If we do not attempt to build and develop a proper planning instrument to deal with the bottlenecks, the investment and the product development problems, the design difficulties and all the other things which affect us, we shall have no hope of combating these serious issues.
There has been a decline in manufacturing industry of massive proportions in the past 15 to 20 years. We are losing markets in many parts of the world. Imports are building up year by year. We have a battle on our hands which can be won only by belief in and support of the principle of planning. I appeal for an abandonment of the doctrinaire approach on these issues. We have to face our problems in a commonsense manner. If we are to survive we must plan. These principles have been pursued by many of our competitors. They have left the planning argument way behind. They have pursued public ownership and are vigorously pursuing planning in a much more detailed and energetic way than we are. In other countries this subject is no longer an

issue of partisan conflict. We must leave behind this doctrinaire battle and accept that planning is the only way ahead.
I apologise for speaking at length, but it is essential that in what remains of this debate we should concentrate on the real issues which an increasing number of people inside and outside the House believe to be of great importance.

7.10 p.m.

Mr. Michael Grylls: I was interested to hear what the hon. Member for Sowerby (Mr. Madden) said about the speech of my hon. Friend the Member for Henley (Mr. Heseltine) in opening the debate. The hon. Member for Sowerby asked what it was all about. The object of the debate is to remove the uncertainty hanging over these industtries. I am sorry that he did not take it in when the speech was made.
We had a curious speech from the Chancellor of the Duchy of Lancaster, with his usual charm, which we all acknowledge. He is a sort of Dr. Jekyll to the Secretary of State for Energy's Mr. Hyde. At the end of his speech the right hon. Gentleman agreed with the motion, and one began to wonder why he did not accept it in toto. But in listening closely one noticed that, although he said that each of the three industries would not be nationalised by the Government, he also in the same breath—presumably for the benefit of his hon. Friends below the Gangway—said that he was still in favour of further nationalisation. Therefore, while he seems to believe that he has removed the uncertainty from three industries—I doubt whether that is true—he has thrown the whole of British industry into further uncertainty.

Mr. Lever: I said that I would support nationalisation in the future in any case where it proved appropriate. I did not say that I would support it as a general proposition.

Mr. Grylls: The right hon. Gentleman, with the most honest, straightforward and sincere motives, appears to misunderstand the situation. He is concerned, as we all are on every side, about investment in industry and about jobs. What he does not seem to realise is that with almost every word he utters he makes the situation worse. This is why the motion is on the Order Paper today—to try to clarify


the position. I regret that the Government have not done this.
I should like to concentrate my remarks on the Labour Party document on the pharmaceutical industry. It is not headed as a discussion paper and it was presented at a Press conference which was not only attended by the chiarman of the committee, the present Minister of State. Department of Health and Social Security but chaired by the right hon. Lady the Member for Blackburn (Mrs. Castle), who until a few days before had been Secretary of State for Social Services.
It is a little more than a vague discussion document of the Labour Party. If the Chancellor of the Duchy of Lancaster is inclined to discard the document, I understand his view, but the Government must understand that that is not the view of industry. All industries—particularly the pharmaceutical industry—read what the Labour Party and the Government have to say. The document was presented to a party conference on the 29th April as a very deep and careful study. When the right hon. Lady was challenged about the paper, two rather obvious questions were put to her. She was asked, "If you intend taking over a pharmaceutical company, which is it to be?" Secondly, she was asked, "How much will it cost?" To these questions, after two years of deep and careful study. the right hon. Lady had no answer at all. Those who had studied the matter had not even thought which company it would be. They certainly had not thought of the cost.
The truth is that this was a heavily weighted committee made up of Left-wing academics and Left-wing politicians, under the general control of the Home Affairs Committee of the Labour Party, presided over by the Secretary of State for Energy.
The dangerous situation for the pharmaceutical industry, in which investment is important, is that it is and has been the political butt of certain sectors of the Labour Party for many years. It has appeared in manifestos and in party conference decisions, and the industry has not known where it stood.
In 1974, when the White Paper on the regeneration of British industry was produced, the pharmaceutical industry was

somewhat relieved to find that it was not included as an industry to be taken over. It breathed a sigh of relief and thought that all was well. Then, when the Chequers policy came out in 1975, the industry quite rightly assumed that, apart from the nationalisation of the shipbuilding and aircraft industries—

Mr. Lever: How could the hon. Gentleman sit silent when the hon. Member for Henley (Mr. Heseltine) said that it had been included in both the manifestos in 1974? Can the hon. Gentleman say whether the supposed threats have disrupted the export achievement or the capital investment of the pharmaceutical industry in the last two years?

Mr. Grylls: On that point, despite what the Labour Party has said and done, the industry has achieved record export sales. Perhaps it would have achieved even more if it had not been for this cloud of uncertainty.
After the White Paper on the regeneration of British industry was produced the pharmaceutical industry assumed that the threat had been removed and that it could get on with its business. But then there was the bombshell of the Press conference of 29th April, presided over by the right hon. Lady, and suddenly the industry found itself back in the party political melting-pot again. As a result, it still does not know where it stands.
What the Chancellor of the Duchy of Lancaster and the Government must understand is that no single action of either the Labour Party or the Government could have done more damage to investment and also to jobs in the chemical and pharmaceutical industries. It is not just a matter of saying that this is only a policy document.
The people who work in these industries should be warned that a large sector of the Parliamentary Labour Party, represented by the hon. Gentlemen opposite in the House today, wants to take over part of these industries. This is why we want to have a clear and unequivocal statement by the Government, not only that they will not take over these industries but also that they will have nothing to do with any such idiotic policy and will not extend the frontier of nationalisa-


tion. This is what the debate today is all about.
The right hon. Gentleman, the Ministers in the Department of Health and Social Security and the Government should know that two-thirds of the pharmaceutical industry is controlled by foreign companies and subsidiaries of foreign multinationals. Many people do not like this, but, whether we like it or not, it is a fact of life.

Mr. John Mendelson: Does the hon. Gentleman like it?

Mr. Grylls: It produces the exports and the jobs and the innovations to cure disease and illness. If it does that, I do not care who owns it. If it is doing this job, it is doing what it is meant to do.
As for the British multinational companies, ICI, Beecham, Fison and so on, 80 per cent. of their business is overseas. We can forget about the foreign multinationals. What will happen to the British multinationals'? The British multinationals, if this sort of threat continues to hang over them, will invest overseas, instead of investing here in Britain and creating more jobs.
The foreign-owned multinationals do not have to invest in Britain, for in fact Britain represents only 4 per cent. of the whole world market for pharmaceutical products. These companies can do without Britain. If the uncertainty continues, they will go to countries which are more hospitable to their investments. That is where they will extend their manufacture and their research.
The Government know the facts but they do not have the guts to speak out. It is the free enterprise system throughout the whole world that is producing the new drugs and the new medicines which are curing disease. No less than £1,000 million a year is spent on research by Britain, the United States, France, Germany and Switzerland together. That is a massive sum of money, produced not by the taxpayer but by these companies through their own efforts.
Hon. Gentlemen opposite should recognise that British research scientists are reckoned to be two and a half times as efficient in cost-effectiveness terms as American research scientists. Is not this a matter of which we in this country

should be proud? As the right hon. Gentleman said, it is because of its innovations that we are getting high export figures and managing to cure disease. I hope that Government supporters sitting below the Gangway, who always tell us to copy what is going on in Eastern Europe—[Laughter]—will remember that, curiously enough, out of 138 major new innovations, none was made behind the Iron Curtain. No laughter on their part can hide that.
Here we have a successful industry. It is one which should be left alone. It is one which is exporting and meeting the Government's challenge to export more each year. But what is the accolade of success? It is to discover that a policy document says that one of these industries will be nationalised. That is what the Government have done—

Mr. Lever: It is not.

Mr. Grylls: It has been done by the party which supports the Government, and the right hon. Gentleman has not firmly rebutted the possibility of further nationalisation.
We are here tonight to ask for a firm assurance from Ministers of the Crown, and it will be interesting to see whether the Secretary of State for Energy echoes precisely the words uttered by the right hon. Gentleman. It is very unlikely that he will. But at least we give the Chancellor of the Duchy his due credit for saying what he said. To all intents and purposes, in an aside way, he has accepted the Opposition's motion. The sad feature is that he has not been prepared to go further and to say that he sees the frontiers between the free enterprise system and the nationalised sector as being quite distinct. On the contrary, he has cast more clouds of doubt not over three industries but over the whole of British industry because, when he said that he would be prepared to see further nationalisation, he did not say which industries he had in mind.
However, the right hon. Gentleman has accepted that the paper produced by the Labour Party in the form of a news release is wrong-headed, and we are grateful for that on behalf of the pharmaceutical industry. He has accepted that any proposal to nationalise banking and insurance is also wrong-headed, and we are grateful for that. But I hope that


he can use his influence as a Minister on his colleagues in the Labour Party to persuade them not to throw around documents of this sort. If he can, I am sure that he will see higher investment in British industry.

7.23 p.m.

Mr. Brian Sedgemore: The hon. Member for Surrey, North-West (Mr. Grylls) concentrated on pharmaceuticals. I can tell him that I have seen much earlier and better drafts of the document to which he referred.
I wish to make a few brief remarks about banking. You will remember, Mr. Deputy Speaker, that in Dante's "Inferno" the usurers were taken into Circle 7 and made to stand on hot sands beneath burning rains alongside the Sodomites. In these more civilised times, all that we ask is that the usurers should be taken into public ownership.
It is not a question whether we shall nationalise the banks, but when, and who will do it first: will the Conservative Party beat us to it? If the party opposite eventually becomes the party of Government, I suspect that in the 1980s we shall find a Conservative Government bullying the City in much the same way that we have bullied the unions. Their form of bullying will be, first, the control of the banks and then the public ownership of the banking system. They will find themselves able to manage capitalism that much more easily by taking the banks into public ownership.
In the Labour Party the aims are different. If we are to plan the economy, control the size and direction of investment, make a success of our policies on public ownership and planning agreements, and set them against a background of price controls and a limitation on profits, the public ownership of the financial institutions is not merely desirable but an essential condition of the success of our policies.
There is no doubt what Labour policies are because the annual conference last year accepted without dissent a document called "Labour in Industry: the Next Step". The threefold thesis behind the document is simple. It is that we see public enterprise and planning agreements as the instruments through which we shall generate in manufacturing industry investment which it needs des-

perately and which the flagging free enterprise system cannot provide. Having generated the demand for investment through those instruments, we can then meet the demand through public ownership of the financial institutions.
Secondly, the document rightly assumes that the level and quality of industrial investment is obviously in part affected by the way in which that investment is financed. It is affected by the alternative sources open to that investment as well as by the performance of manufacturing industry.
It is obvious that the behaviour of the banks is in part responsible for the low level and poor quality of the investment that we have had since the war, but only in part. It would be absurd to say, however, that it is irrelevant to the problem.
The annual conference, therefore, accepted four basic proposals. The first of them was:
We should create a substantial, publicly-owned sector in banking—whilst, as in France, retaining choice for the consumer.
The second was:
A specialist publicly-owned institution should be set up which could direct savings into investment—on a scale similar to the Caisse des Depots in France.
The third was:
A large proportion of institutional funds should be channelled into industrial investment through planning agreements and public enterprise.
The fourth was:
Britain should adopt a system of investment funds, similar to that in Sweden, but operated largely through the Planning Agreement system.
If we pause for a moment to consider whether those four proposals are sensible or nonsensical it is useful to begin by comparing the way in which British firms finance their investment with the way in which firms in the rest of the Western world do it.
Traditionally, there are three basic differences. Traditionally, firms in the United Kingdom are more dependent on funds which are raised internally from retained profits than is the case abroad. Secondly, when companies in the United Kingdom raise funds externally they tend to be short-term rather than long-term funds. Thirdly, United Kingdom banks demand much greater security for loans,


whether short-term or long-term, from industrial companies than is the case abroad.
No one can deny that it is more difficult for industrial firms in the United Kingdom to raise funds from banks than it is for most of our competitors abroad. We should contrast the caution which banks in the United Kingdom have when lending money to industrial companies and the ease with which they lent money to secondary banks and property companies after Barber's competition and credit control policies were introduced.
It is fair to say that that traditional pattern has changed a little in the last five years, and the basic change has been that United Kingdom industrial companies have switched more from internal to external financing, but they have not switched from short-term to long-term financing. Looking at the figures from 1970 to 1974 we see that the proportion of capital funds accounted for by retained profits has fallen from 60 per cent. to 45 per cent. We also see that the share of capital funds raised from banks has risen from 10 per cent. to 40 per cent. We see from the 1975 figures that both those trends have continued. Looking at bank loans to industry we see, first, that almost all of them have been for short-term working capital. Certainly they have not been related to long-term capital for industry. I believe that 90 per cent. of bank loans in this country are short-term in the sense that they are for less than one year. What is more, most of the remainder are medium-term in the sense that they are not for more than five years.

Mr. Lever: There has been a striking change in the trend. My hon. Friend will find that the latest figures show that medium-term lending by the banks has now moved up to 25 per cent. compared with the much lower figure of the past.

Mr. Sedgemore: My right hon. Friend has just quoted a figure which I was about to quote. He has picked on the same figure, so he is not giving me anything new.
That proportion of short-term loans is in fact the highest proportion of loans by the banks to industrial companies in the Western world. The banks now tell

us—their published figures are very difficult to get hold of—that 25 per cent. of loans to companies in manufacturing industries are medium-term. Even assuming that this is right, it is still a low figure compared with the rest of the Western world. It compares with 66 per cent. of long-term banking loans in Germany.

Mr. Wrigglesworth: Would my hon. Friend not accept that the reason for that is that firms have preferred to borrow short-term rather than medium or longterm because it is less expensive? The difficulty is in establishing how much short-term credit is rolling long-term credit.

Mr. Sedgemore: I accept that to some extent, but it does not deflect from the basic premise that we have to generate a demand for capital funds and then see how best to meet that demand.
Over the past five years there has been a shift from retained profits to external financing by companies in this country, and we must accept that this has come not because the firms wanted it but because of the reduction of profit margins in British manufacturing industry. I believe that with proper planning the shift from retained profits to external financing is a desirable activity. It is desirable also that we, as a Government, should limit profit margins in this country.
Most hon. Members accept that the process of companies financing more and more investment externally should continue. That process is more likely to be carried out under publicly-owned financial institutions than under privately-owned ones. There is no other way in which one can move to massive external financing, if the Labour Party is, at the same time, to have a coherent policy on prices and profits. Price control and profit limitation entail external financing by companies, and that in turn entails publicly-owned institutions.
There may be hon. Members who do not want price control and limitation of profits, but there are powerful social and economic arguments for long-term policies on these matters. If hon. Members believe that this is undesirable they should ask the housewives of this country and the workers on the shop floor. Manifestly, housewives would like price control, and, manifestly, workers on the shop


floor will not agree to wages cuts or restraints, either statutory or voluntary, if there is no control on dividends and profits. Those who argue from the Government Front Bench that we are moving to a system of no controls on profits or prices destroy the whole concept of any incomes policy, whether it be voluntary or statutory.
The Labour Party's policy towards industry should work on the assumption that retained profits will never again be a major source of financing investment. We should urge industry to find most of its investment through long-term loans and equity loans through publicly-owned institutions.
What hon. Members on both sides fail to realise is that the history of the past 30 years has shown that it is not just a question of making profits and reinvesting in manufacturing industry in this country. That is not what happens. It is living in an unreal world to assume that, somehow, because one stands up at the Dispatch Box and decrees that it should happen, it will happen automatically. One cannot, by standing up at the Dispatch Box and saying "Today's profits are tomorrow's jobs", automatically revive the doctrines of Adam Smith, either in relation to industry or private finance.
Basically we must ensure that voluntary savings play a much bigger rôle in industrial investment through publicly-owned institutions. What we have got to do on this side of the House is get these simple relationships home to the Cabinet. As I came up to the House this morning in my car I was wondering how we could get over this crisis of misunderstanding. When the Mothers' Union or the Rotary Club do not understand something they ask an expert to come to give them a lecture on it. It could be a useful constitutional innovation to arrange for members of the Tribune Group to go to Cabinet meetings and give a talk. Then they could put questions to the relevant departmental Ministers, and if those Ministers did not take the facts on board they could be sacked instead of being shifted—as at present—to other Departments. Since sacking people who are incompetent is the basis of free enterprise I am sure that both Front Benches would support that idea in its entirety.
I listened carefully to the speech of the hon. Member for Henley (Mr. Heseltine). If in any major debating chamber in Europe he made that speech he would be laughed out of court. He talks about the evils of public ownership in the financial sector, but when we look at Gaullist Right-wing France we see that the major banks were nationalised in 1945. They have a much closer relationship with industry, and 85 per cent. of all banking deposits in France arc deposited in publicly owned, semipublicly owned or co-operative banks.
The largest banking institution in France is the Caisse des Depots, which lends money to the public sector. The hon. Member for Henley misled the House when he said the difference was that publicly-owned banks in France lend to the private and not the public sector. I have been looking at the firms to which this bank has lent money, and they include the following companies in the public sector, the totally publicly owned Renault, the mines, the railways, the gas and electricity industries, the matches and tobacco industries. It also lends money to industries in which there is a controlling State interest—the ports, aerospace, petroleum, shipping, aviation, electrical and mechanical engineering, and minerals. It also lends to industries with a minority public interest—household goods, building and civil engineering, and organic chemicals.
Why should something which is good for Gaullist France be so evil for Socialist Britain? Is it because in one of these two countries there is a Left-wing civil service, and in the other—and I will not say which—there is a Right-wing civil service?
I have read that the Prime Minister likes the German model. In my German model there are 750 publicly owned savings banks and they control 39 per cent. of banking deposits. They are owned by local authorities, and they help the public enterprise of local authorities, and the small and medium-sized firms which hon. Members opposite always claim are the backbone of this country. Why, then, do we not create 750 savings banks to help our small and medium-sized firms?
In Japan there are 12 major financial institutions which are publicly owned,


and in 1975 those institutions put more into net investment in industry than the whole of the private banking sector in that country. There is a development bank which gets funds from the Government, and generates them into private industry, according to a Government plan—the very thing that seems to upset Conservative Members.
I could go through the banking systems of the world and talk about public and co-operative ownership, but it is basically in the United Kingdom and the United States that one finds this laissez-faire, freewheeling, free enterprise banking system. People on the Continent laugh at us because we have this decadent island mentality towards our publicly-owned financial institutions.
There are other reasons why we should take the financial institutions into public ownership. All Government fiscal and monetary policy is designed to act as though banks and other financial institutions were publicly owned. The present system merely creates an intermediate mechanism with which the Government have to deal, and it would be far more sensible, from the point of view of monetary and fiscal policy, if the financial system were itself publicly owned.
More than that, the financial institutions here are centres of immense power and wealth. That power and wealth has been abused, and it has been particularly bitterly abused during the past five years. On 30th November 1973 London and County Securities went bust, and subsequently 30 secondary banks here got into difficulties that were more or less serious. When somebody tells me that public ownership of the banking system in this country would not be popular, I ask him to consider what the depositors of Moorgate Mercantile Co. Ltd., London and County Securities, Western Credit, Keyser Ullman Ltd., and Cannon Street Investments Ltd. would say to that. I ask him to tell me what would be the attitude of people towards the nationalisation of insurance companies, bearing in mind Vehicle and General, Fire Auto Marine and Nation Life.
I have met strenuous public opposition to the public ownership of British manufacturing industry, but none to the

public ownership of the financial institutions. The public now know that the term "bankable insurance "is not a term one can sensibly give, and if one wants to control these centres of wealth and power, public ownership is the answer.
My right hon. Friend the Secretary of State for Energy, who is to wind up the debate, spoke last Saturday in a church at Burford. He was talking about one line of Socialism, that which links Christianity to Socialism, about the godless, and about the evil policies of modern Conservatism, and he asked himself what the Levellers would have said about the society in which we live today. The answer that he gave himself is relevant to this debate, because he said:
The Levellers would surely concentrate their attention on the huge accumulation of financial power in our society and the continued exclusion of working people from effective democratic power over it, and link the present maldistribution of wealth, here and world wide, to the maldistribution of power.
If the Labour Party is on our side, if we have the Secretary of State for Energy on our side, and if, too, we have God on our side, we shall overcome, some day.

6.43 p.m.

Mr. Charles Fletcher-Cooke: The right hon. Gentleman the Chancellor of the Duchy of Lancaster thought that this was a totally unnecessary motion, since it was obvious that there was no intention of nationalising banking insurance and pharmaceuticals. I thought it was rather a convincing remark, and I thought, too, that there was something in the comment of the Liberal spokesman that that should be the end of the debate, but to judge from the speech that we have just heard from the hon. Member for Luton, West (Mr. Sedgemore) it is not the end of the debate at all
Not merely is there some document—the exact status of which none of us understands—that has been circulating about the pharmaceutical industry, but there is a resolution of the highest structure in the Labour Party—the annual conference last year—saying that certain financial institutions are to be taken in to public control.

Mr. Lever: It was said in 1935 as well as in 1971.

Mr. Fletcher-Cooke: Yes, and apparently there are some words in the manifesto that are unknown to the Chancellor of the Duchy of Lancaster. Quite what they mean is a different matter. They have all the ambiguity of a sacred text. A foreigner who is thinking of putting his money into this country could be forgiven if, on reading both the manifestos of 1974 and finding a reference to taking into public ownership sections of the pharmaceutical industry, he had doubts about whether to do that, because he did not understand—as indeed many people in this country and in this House do not understand—the precise relationship between the various organs and agencies of the Government and the Labour Party. Foreigners are not to be blamed for not understanding it, because the Labour Party itself does not always understand it.

Mr. Cryer: Why is it that Conservative Members are always talking about foreign investors buying their way into this country? Why are they always talking in encouraging terms to foreigners, without ever encouraging the British people to invest in this country through public ownership?

Mr. Fletcher-Cooke: I do not know that I have always been talking about either or those things, but I want to see as much investment from abroad as from domestic savings in industry, commerce, and the financial institutions in this country. Until fairly recently both sources of supply have been doing fairly well. That is the only way in which we can get investment if we have the money to invest. We shall not get investment—indeed, we shall get deinvestment or disinvestment—if those with money to invest hear the threats to people's savings and to foreign investment that are constantly flung between the corridors of No. 10, the Departments of Energy and Industry, Transport House, and various conferences and study groups.
From time to time this kind of debate, academic perhaps as the Liberals say it is, is necessary, and it is necesary to get in reply the categoric assurance that we did receive. The difficulty about accepting it is that the doctrine of collective ministerial responsibility has become so eroded under this Government that one does not really know whether such a state-

ment is binding on all Ministers of the Crown, and for how long.
I remember a statement—on the other side of the fence—by the Home Secretary recently. He said that the public sector had got to such a high degree of percentage that it threatened the very existence of the plural society, whatever that may mean. Within 24 hours than statement was disowned by the Chief Secretary to the Treasury.

Mr. John Mendelson: I know that the hon. and learned Gentleman does not want to misrepresent the Home Secretary, who is not present. My right hon. Friend was talking about the level of public expenditure and taxation, not about public ownership.

Mr. Fletcher-Cooke: I am sure that the hon. Gentleman is right. When the right hon. Gentleman was talking about the threat to the plural society he was talking about the level of taxation. It was that which the Chief Secretary to the Treasury almost instantly contradicted. Therefore, it is not true to say that categoric asurances from the Dispatch Box can be taken with quite that fortitude that used to be the case.
I think it was the hon. Member for Sowerby (Mr. Madden) who thought—and I accept this—that this would have been a much more interesting debate, though perhaps not quite so immediately necessary in view of the publication of this document, if we could have debated the future of the nationalised industries, what is to be done with them, whether some are to be denationalised and how the rest are to be reformed.
I notice that Sir William Ryland, who has had his troubles—I put it no higher—in a nationalised industry, said on Monday that his organisation should be split in two. That might be one way of dealing with this large and failing organisation. We could split it into two or perhaps even more parts. Sir William said that the telecommunications part of the Post Office should be a partnership between private industry and the public. That could not but be an improvement on the present situation in that great monolith.
I am waiting for Sir Monty Finniston's speech the day after he ceases to be head of the British Steel Corporation. No


doubt he will then be less inhibited about what should happen at the BSC.
I fear that my party has not taken its courage in its hands about what should be done with nationalised industries and to what extent it might be possible to denationalise some.
We have a startling contrast before us in two of our great motor companies, which are now enjoying large sums of public money. Leyland is 95 per cent. owned by the State. We know that however many dire warnings are issued by Mr. Park or Mr. Whittaker, the work force does not believe that the Government will allow the company to collapse. The State has too great a stake in it. The promised, much anticipated improvement in labour relations in Leyland is coming imperceptibly slowly.
Let hon. Members contrast that with the situation at Chrysler, where the Govenment investment is a minority and where ownership remains in capitalist hands in Detroit. There has been a magical transformation in labour relations at Ryton, Linwood and elsewhere since the dramas of last year. Why is that? It is not because public money has been put in, but because of the fear that Detroit will pull out. It is that sanction which causes the difference in behaviour of people who are the same in nature. The marked difference can only be accounted for by the fact that there is the Detroit sanction in Chrysler and no such sanction at Leyland.
I do not expect hon. Members opposite to agree with me but this is the sort of point which I had hoped that today—or certainly sooner rather than later—the Front Bench spokesmen of my party would tackle publicly, perhaps in the sort of document that has been the subject of so much debate and scrutiny today.

Mr. John Lee (Birmingham, Hands-worth): Are we to understand that the hon. and learned Gentleman wants an increasing amount of British industry to be invested abroad, so that there will be a sanction over the work force, in that the foreign owners can close down a firm if the conduct of the workers displeases them?

Mr. Fletcher-Cooke: No. I do not want any such thing. I do not want any

more nationalisation, because there is then no sanction. I want less nationalisation and more denationalisation, and I want to be told by my Front Bench spokemen how soon it can be done.

7.55 p.m.

Mr. Ian Wrigglesworth: I begin by declaring an interest as a former employee of the only nationalised current account banking organisation in this country—National Giro, the Post Office banking service that my right hon. Friend the Secretary of State for Energy set up when he was Postmaster-General. I am still able to go back to the Post Office should I be unfortunate to be defeated in a General Election, and working again in public sector banking would of course be a great pleasure.
Just to balance that, I also worked previously for the Midland Bank, so I have had a little experience of both sides. For that reason, it gives me pleasure to follow the comments of some, though not all, hon. Members.
It is not surprising that politicians are held in contempt by some members of the public when they hear the sort of partisan claptrap that we heard from the hon. Member for Henley (Mr. Heseltine) at the beginning of the debate. His speech was full of half-truths and a selective choice of facts to support his own dogmatic and doctrinaire view. His strident speech on one of the most serious subjects that the House could be considering did nothing to enhance the reputation of Parliament or politicians.
If the Opposition wanted to know the Government's policy, they had only to look at our manifesto. We said, when we faced the electorate in October 1974, that we would bring forward early proposals to ensure that banking and insurance made a better contribution to our national economy. That is what the Government have been doing—though not as urgently or strenuously as some on this side would have wished. It does not need a restatement of that part of the manifesto for the Opposition to know our policy.
The Opposition are simply trying today to make cheap political capital out of an internal document being discussed in the Labour Party. I only wish we could see such documents emanating from the Conservative Party research department,


so that there was some public discussion of the Opposition's policies. At least we are not frightened to have debates on policy within our party. The Opposition are making a "phoney "attempt to confuse the electorate into thinking that the Government and Labour Party policies are not as they have been stated.
I wish to speak particularly about banking, because of my involvement in it. A case can be made for public ownership in the banking sector, though I do not agree with my hon. Friend the Member for Luton, West (Mr. Sedgemore), who in his incisive speech, said that the major case for public ownership was that the financial institutions had not been channelling funds into manufacturing industry and other enterprises in the economy which would be beneficial to us all.
I take the view that the problem of investment is a problem not of supply but of demand. I believe that there has been a lack of investment over the decades because of a lack of investment opportunity arising from poor and wrongheaded Government policies, and from very poor management in industry. I think that is the principal cause. We should direct our attention towards that more than to a consideration of institutional methods of trying to direct funds into industry.
The fixed capital expenditure per man in engineering in this country is less than half of that in Germany, France, Sweden, Japan and the United States. There is such a disparity that it must be something more than the question of institutions that is involved. In my view it is principally the responsibility of management that that deplorable situation should exist.
If we go further and consider the funds available, and how they have been taken up in the recent past, again we see that it is not the availability of funds that is the problem but the fact that managements and industries have not said "We want the funds to invest for the development of our concerns." Let us consider, for instance, Finance for Industry, which has recently been established as a result of Government pressure. That institution was going to lend £1 billion over two years. In fact, in the first 15 months only £100 million has been loaned, while £200 million has been committed. That

is a tiny proportion of the total that was anticipated.
The National Westminster and Barclays have recently said that they have massive loans committed but that they have not been taken up by industry.

Mr. Sedgemore: I accept what my hon. Friend says—namely, that funds offered by the banks have not been taken up during the past five years—but is this not a question of the terms and conditions on which funds are offered to industry? Is my hon. Friend saying that it makes no difference whether the banks are publicly owned?

Mr. Wrigglesworth: I accept that point, to some extent. Therefore, I welcome the setting up of the FFI. I welcome the establishment of the Equity Bank, although the impact it will make is extremely doubtful. Certainly I applaud the establishment of the National Enterprise Board.
Why is it that over the past few decades large, medium and small industries with successful managements and good industrial relations have been able to get funds when they wanted them, whereas other industries have not? For example, in the Teesside area, in my constituency, ICI has had no difficulty in finding funds. As we know, it has just had another rights issue. Over the decades it has had no difficulty in getting millions of pounds for investment. It has very good labour relations. But I put all this down to good management. There is no magic about that. It has had very good investment and management policies of the decades.
In the public sector, some parts of which I know very well, there have been similarly good management and labour relations in many areas, and consistently good investment policy over a long period. The crucial matter is the quality of the management in the enterprise rather than the institutions providing the funds for investment.
What we can make out as a case for public ownership first and perhaps foremost, although the banks would vigorously deny this, is that profits in the deposit banking system depend to a major extent on Government monetary and interest rate policies. The banks that benefit from a so-called free deposit


base—that is to say, a large current account base—can lend out funds at rates closely linked to the minimum lending rate of the Bank of England. This endowment factor comes into effect in periods of high short-term lending rates, above 10 per cent., and at higher rates the gearing becomes quite large because the cost of maintaining accounts is fairly stable in relation to the income.
In order to maintain the attraction of sterling as a currency in which the oil producers and other non-residents should retain their holdings, interest rates in the United Kingdom are bound to be anything between two full points to four full points above the Eurodollar rates over the next few years to compensate the sterling holder for the exchange risk he is running against the dollar.

Mr. John Moore: I am following with great interest and considerable approval many of the hon. Gentleman's comments. On his point about the relatively high interest rates that we have been forced to maintain because of the need to attract funds, will he comment on the article in today's Guardian by his hon. Friend the Member for Dudley, West (Dr. Phipps), who is arguing the case for a two-tier interest structure that might make industrial investment more profitable?

Mr. Wrigglesworth: I intend to come to that. In effect, the Government are already doing that in their discussions with the Bank of England and the clearing banks about giving guarantees on medium-term loans. That is a similar proposal. The London inter-bank rate for sterling deposits has historically reflected the higher United Kingdom margin, and may be expected to stay in a range which would put lending rates above the administrative costs of running current accounts. Where this is not the case, the banks will reintroduce charges in response to external policy, in which case there will be little justification for passing on to private shareholders the benefits of what is, in effect, a Government decision, Government policies and international policies which bear no relation or relevance to them or their business.
The banking sector, as the secondary bank crisis has shown, benefits in practice from a quasi-guarantee from the

central authorities for its deposits. In the discussions which were held at the Bank of England at the time of the London and County failure, it was decided that the deposits which unconnected companies and individuals had been unwise enough to make with the secondary banks should not be allowed to disappear through default. For that reason the support operation that was known as the "lifeboat" was launched by the Bank of England and the clearing banks.
Furthermore, the Bank of England took the view at a later stage that there might well be a case for supporting some major property companies. It took that view because if property companies such as the Stern and Lyon groups went into bankruptcy, the assets of the clearing banks would be substantially reduced in value and those banks might come under suspicion. At that stage the Bank was preparing to use essential Government funds for the support of the private property sector. Nothing could illustrate more closely that, in its proper concern for the health of the financial system, the Bank of England in practice extends what is virtually a guarantee not only to the members of the clearing banks and the accepting houses committees, but to banks outside that magic circle, some of which have pursued policies that have been shown to be very dangerous, and in some cases fatal.
The argument is not that the Bank should not have come to the rescue, although in practice it had to, and managed to do so in a way that ensured that in the worst cases the defaulting banks went out of business. The point is that the Bank should never have found itself in that position in the first place.

Mr. Lee: I am following what my hon. Friend is saying with great interest. He is making an extremely interesting contribution. Does he agree that one of the faults of the rescue operation was that the secondary banks which were rescued, some of which were far from reputable in their conduct, were allowed to go on in their own sweet way, sometimes conducting secondary mortgage businesses of an extremely usurious character? Does my hon. Friend agree that the Bank of England, having helped to rescue them, has done nothing to bring about any improvement in their standards of conduct?

Mr. Wrigglesworth: I have only limited time. I could go on at length on this subject. I hope that the new regulations that will be brought in to control banking and the Consumer Credit Act, through the office of the Director General of Fair Trading, will get over that problem.
There are two separate issues. First if institutions enjoy an effective guarantee from the taxpayer, the taxpayer should reap some of the benefit. In the USA that is achieved partly through the Federal Deposit Insurance Corporation, a public institution, which, for a fee, insures deposits at insured banks up to a maximum of $40,000 per depositor.
It is sometimes argued that the cost to the banks of complying with monetary and credit controls constitutes a compensating tax on banks. In the United Kingdom the cost to banks of complying with the present reserve asset requirements, to which the Chancellor of the Duchy of Lancaster referred earlier, is remarkably low by international standards.
To some extent an extension of public ownership into banking could meet the purposes which I have outlined.
At present, for two particular reasons —one a political reason and the other a straightforward practical reason—the Government obviously cannot and should not take action on this front.
The practical reasons why immediate steps to achieve public ownership in banking would create more problems are simply that, in present circumstances, foreign and domestic confidence in the British financial system should be reinforced and in no way undermined. Whether we like it or not, it only needs non-resident holders of sterling to become worried about the solidity of the system—there have been signs of that happening recently—for them to start withdrawing their sterling balances and switching them out across the exchanges. As this is their money, we cannot condemn them out of hand if they do that. In this instance, I am talking not about speculators wanting to make a quick buck but about nations that invest their money in this country because they think that it is a good credit risk.
The problem of confidence may be temporary. It could be that in future, if the policy was announced well in advance—I come to my second reason now

—and was well debated, any action to bring the clearing banks or the insurance companies into public ownership would not provoke, even with the opposition of the banks, a flight of confidence from the British financial system. But it goes without saying that such a policy should be debated well in advance of a General Election and be included in an election manifesto.
My view is that the case for embarking upon such a scheme is marginal. The benefits that might accrue as a result of taking banks into public ownership can be greatly exaggerated and in many ways hardly worth the upset that would be caused. The controls that I have outlined and the additional controls that the Bank of England has over the clearing banks constitute massive Government control if the Chancellor is prepared to exercise that control and direction.
I want to see the Labour Party and Government doing two things. I want them to encourage existing institutions in the public sector banking service to grow and to prosper. The Government have already put two Bills through the House with the object of doing just that. They have taken the shackles off the trustee savings banks and extended the range of facilities that the National Giro and the Post Office can provide.
I should like the Paymaster-General's office, which is virtually a bank within the Government, to be brought into the National Giro operation instead of working almost in competition with it. I should also like the National Savings Bank brought in as the deposit side of the personal banking service under the National Giro.
With those two developments—a large, straightforward publicly-owned Giro-cum-Paymaster - General - cum - National Savings Bank—we would have a major public banking institution. I believe that we could achieve that without very much difficulty. With the Trustee Savings Bank, with its 10 million customers—it has an enormous number of customers and outlets—we would have yet another public sector force in banking, which would provide the public with a much broader range of banking facilities and options than they have now.
Secondly, I want the Government to introduce much stricter control over the


banking system. That should be done with much greater accountability than is done at the moment. We need only to look at the report by the inspector on the London and County Securities collapse to see the need for such control. In that report the inspector said:
Up to the time of the collapse of London and County the Bank"—
the Bank of England—
did not much concern itself with secondary banks.
That was a remarkable comment.
But since the collapse the Bank of England has taken action, in particular by calling for detailed returns.
I have some doubts about the effectiveness of those detailed returns. The report goes on:
The Department of Trade is responsible for monitoring the accounts of those which are deposit-taking institutions under the Protection of Depositors Act 1963 … It appears that this lesson still needs to be learned and that greater control over the names and descriptions of secondary banks is necessary.
At present there are at least 10 important and overlapping types of official banking recognition in the United Kingdom granted by bodies ranging from the Bank of England to the Registrar of Friendly Societies. The system of supervision, even for banks at the highest point on this ladder of recognition, and despite some recent tightening up, remains totally disorganised. What is needed is a clear system of bank licensing for private sector banks so that everyone, including the general public, is aware of the institutions which can expect to benefit from official support and a complementary system of continuing controls on the prudential behaviour of licensed banks, ranging from balance sheet constraints to checks on the quality of banking. Banks must have the right capital structures and liquidity ratios to protect people who place deposits with them. Whatever official body is charged with the task of carrying out the supervision of the banking system, it should ultimately be accountable to this House.
It is wrong that, when I go to the Table Office to put down Questions about the Bank of England and its work, or about the banking system, I cannot put them down to the Chancellor of the Exchequer. I suggest that any system of licensing of banks or of supervision

should be accountable to this House, so that Members may ask the Chancellor about the work of the supervisory body, whether it be the Bank of England or any other.
I am a Co-operative sponsored Member of Parliament. Therefore, it would be remiss of me not to mention the work done by the Co-operative Insurance Society and the Co-operative Bank. The Co-operative Bank is developing at an enormous rate. It is opening new banks. Indeed, one of my hon. Friends has been opening one of its new Handy banks in Manchester today. That development and expansion will go on. Clearly, such banks have an important rôle to play within the banking structure. The Cooperative Bank can play an important rôle in the development of the non-private sector. It has no fears about the continuation of the clearing banks, because it will be able to compete adequately against them.
Similarly with the Co-operative Insurance Society. We on the Government Benches tend to talk about public ownership as though it can take only the form of nationalisation, but, of course, the Co-operative Insurance Society is a mutually-owned society, owned by its policyholders, and that is a form of ownership that I hope will commend itself to my hon. Friends. I hope that my hon. Friends would not want to propose, as the Labour Party did at one time, that the Co-operative Insurance Society should be lumped in with the others and turned into a nationalised organisation, because it is providing a service for many working people which we can all applaud.
I hope that the Government will proceed along the hard-headed, relevant and practical lines that I have suggested this evening and will not be tempted by the hon. Member for Henley or other Opposition Members into the irrelevant, doctrinaire avenues down which they have sought to lead the House this evening.

8.21 p.m.

Mr. Michael Marshall: It is always a pleasure to speak after the hon. Member for Thornaby (Mr. Wriggles-worth). Indeed, I have a feeling that this is where we came in on the Post Office (Banking Services) Act. However, the hon. Gentleman made a number of comments with which I agree.


Although I do not feel able in the time available to follow all the paths that he trod, he was absolutely right in bringing out the inbuilt structural problems that we face in our society and in the whole basis upon which confidence has been a critical element in the way in which we have conducted our economic affairs—or rather, the lack of that confidence.
When the hon. Gentleman discussed the problem that we faced in relation to sterling balances—above all, we have to export to live, to cover the cost of our raw materials and food—I found myself in a great deal of sympathy with what he said. He will not be surprised when I say that I still feel unhappy about the further extension of what is popularly known as Benn's Bank, the Post Office Giro banking service, because that itself was another example of the kind of ad hoc-ery that we have had under successive Labour Governments, where the idea of State ownership was clearly preeminent in the minds of the people who brought that measure to the statute book instead of the necessary planning and justification that should have gone into that proposal.
The question of planning brings me to some of the comments of the hon. Member for Luton, West (Mr. Sedgemore). He, too, made a speech that was full of interest to us, and if any justification were needed for the Opposition's motion, certainly it came in speeches such as that which we heard from him. I do not think that the examples that he gave are particularly well founded. I think that he is somewhat of a sucker for international comparisons and has perhaps unwisely fallen for a French system, which in my view has very few parallels with our own. For example, he spoke of the French civil servants. Although he did not specify the political label as between French civil servants and our own, he seemed to imply that such labels might be the critical element. I suggest that French civil servants may be the more business-oriented. They are able to be directors of companies while acting as civil servants. Their system is different from ours. I tend to agree with what was said by the hon. Member for Thornaby—that it is not in the reform of our systems that the answer lies but in looking towards more effective use of what we have. It is a pity that the

debate has not had the opportunity of developing as fully as we might have wished.
The hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) tried to ride the old Liberal hobby-horse of a plague on both houses. I think that we well understand that over the next few weeks any Liberal spokesman is likely to make what is essentially a "primary" speech, but that is not a sufficient justification for the brief intervention that he made before leaving us, because the issues on which he fleetingly touched have been prominent in the debate.
The Opposition should not in any sense apologise for putting down the motion. On the contrary, it has brought out a sharp difference of opinion within the Labour Party, and the assurances that the Chancellor of the Duchy gave us are assurances that the House and the country are fully entitled to consider. It is on that score that I want to try to weigh up what credence we can give to those assurances.
The Secretary of State for Energy, who will be replying to the debate, will be on trial in many ways. He must appreciate that he carries a very considerable personal rôle in this argument within the Labour Party. That is well known. I shall be most interested to see whether tonight he is able to reflect what I concede is an honest difference of opinion within the Labour Party, or whether, as I suspect, he will fall back on the tired old tactic of attacking the Opposition. I hope to hear constructive thinking from him, because this is an argument that the country is entitled to consider. It has been posed between those who feel that there is a case for further nationalisation in these industries and those, apparently in Government circles, who are at present willing to give assurances that they have no intention of bringing forward proposals to nationalise insurance or banking or the pharmaceutical industry.
However, those assurances are hard to accept because they follow so many twists and turns in recent changes of Cabinet collective responsibility. We remember the abandonment of that doctrine in the EEC argument. We have seen it abandoned, in effect, in arguments about the British Leyland and Chrysler situations. Moreover, if we look at the history of the Labour Party since the


war, we find that its record in regard to nationalised industries is one of no clear, coherent and balanced view, and, in my opinion, one of ad hoc-ery of the very worst kind.
It is perhaps sad that if one looks at the effect of nationalisation one finds that the three elements that come out so strongly are the unplanned, unprofitable and unpopular aspects of the Labour Party's work in Britain since the war. I say "sad" because whatever I might wish to see in terms of which party is in office, I do not think that anyone would wish to see our country suffer as it has done, unnecessarily, through this argument. Therefore, to some extent I welcome the kind of constructive view that has been put forward by the hon. Member for Thornaby—reflecting, as he does, our background in both private and public banking—in looking for some breakaway from some of the very sterile aspects of this argument.
However, we cannot gloss over Labour's failures in nationalisation, because they are the failures from which we must learn lessons if we are to try to see our way ahead on the unplanned aspect of nationalisation. The events of the years when the coal mining industry was being nationalised must be common knowledge. We all know the saga of the then Mr. Shinwell looking for the blueprint which did not exist. Anyone with experience in the steel industry will know that no one in any part of the steel industry in the world would support the motion that the 14 largest steel companies was a sensible basis upon which the industry should have been nationalised. If I were a nationaliser, which I am not, I could put forward a far better approach to that industry, which would take account of regional balances and product specialisation—which might have given the Labour Party some chance of chalking up a success.
It is this consistent lack of success, this £1,000 million cumulative loss in the post-war period through nationalised industries, that makes the Labour Party so diffident when it comes to putting forward proposals—and rightly so. They have not got the planning aspect right and they have not, in my view, come to terms with the genuine mixed economy

view which one half of the party puts forward and which the other half disputes. Therefore they fall between both stools.
We have seen this not only in the unprofitability of nationalised industries, but also in the unpopularity of nationalised industries. I speak from both the consumer's point of view and from the employee's point of view. It must be clear to anyone who looks at the steel industry today that the employees of the industry feel that they are nobody's friends. They are subject to criticism from all sides and much of this criticism is unfairly levelled at them because the problems they face are inflicted upon them by the Labour Government of the day.
If we turn to the banking situation. again I would argue that the proposal to extend the State banking service of Post Office Giro is a wedge in the door. It is the beginning of what the Chairman of the Post Office Giro banking service described as the possibility of a massive State bank. I do not think that, on the basis of a £30 million loss, or on the basis of a concern which is technically insolvent, or on the basis of writing oft half the losses and putting the balance into public dividend capital, this augurs well for the Government's serious thinking in these matters.
Therefore, my hon. Friend the Member for Henley was right to call for assurances over these three industries. I would not apologise, if we can today remove uncertainty from at least three items on the shopping list. If this debate has done nothing else, it has given us the opportunity for a moment for pause before the battle is joined once again.
I cannot feel too sanguine, because the speech of the Chancellor of the Duchy was in so many ways the kind of "Whig and Tory measures" approach to life which we are getting from that Front Bench as a fairly consistent theme. The people of this country are right to ask themselves whether this kind of "follow the Wilson, fix it era" or "the Sunny Jim take-off of Stanley Baldwin" approach is something in which they can believe.
Hon. Members opposite have shown that on the question of public ownership there is a deep divide in their party


But to suggest that this argument is clearly recognised, or to suggest that the assurances which we had today were crystal clear, is by no means the case. Nevertheless, if the House or the country had wished to have some indication of Government policy, this debate has certainly served its purpose.
Two aspects worry me most about the present state of our nationalised industries. Considering the opportunities they have for making change, the Government seem hemmed in by the kind of dogmatic arguments still being heard in the House. I should like to see whether we could find more encouragement for the sort of joint venture approach to life which has not been fully explored throughout our debates on these subjects. It is significant that, in a company such as Round Oak in the steel industry, fifty-fifty public and private concern, no one talks about industrial relations or operating problems. It seems to me that the divorcing of that kind of company from political arguments is a significant way ahead and that we should try to remove many of our nationalised industries from this pure State ownership—pure denationalisation, type of argument.
We have a good opportunity now, through our membership of the EEC, to seek more joint ventures across European lines which would assure our market within Europe. We have good opportunities to consider the making of primary steel in this country when the cold-rolling plants in Germany have problems with their finishing works along the Rhine. These are some of the more imaginative approaches that one would hope to hear from Government spokesmen on this matter.
In my experience it has been from the Back Benches on the other side of the House that some constructive thoughts have been coming forward in this debate. Although I do not agree with a great deal of the comments from below the Gangway, at least they showed some willingness to put their thoughts before us, whereas the Government stick to this outworn and outdated shopping list and seem to be carrying out a tidying-up operation in which they do not consider arguments but simply press on with the list.
We should be grateful to the Chancellor of the Duchy. He accepted almost at the outset that our motion was not only valid but one on which he could give us an absolute assurance. The divide which has occurred since then is honest, and I urge hon. Members opposite to take advantage of this opportunity to express their views freely and to let the House and the country know where they stand.
If the Government want to support the Opposition motion, we shall know where the Government supporters stand on the matter of banking, insurance and pharmaceuticals. If hon. Members opposite who do not take the same view wish then to vote against that motion, the numerical picture of the Labour Party will be clear to the country and helpful to all concerned. I make that suggestion in a constructive spirit, knowing that Labour Members will want to put their votes where their convictions lie. I am happy that we have had this debate and I look forward to a good response from Labour Members.

8.35 p.m.

Mr. Bob Cryer: It was clear from the speech of the hon. Member for Arundel (Mr. Marshall) that there are deep divides in the Conservative Party. His moderate approach contrasted sharply with the savage attack by the hon. Member for Henley (Mr. Heseltine), who betrayed a startling lack of concern and consideration for any of the publicly-owned industries. I do not want to repeat what the Chancellor of the Duchy said, but if the hon. Member for Henley became a Minister, which is extremely unlikely, for a variety of reasons—not least the shifting sands of policy from time to time in the Tory Party—he would presumably have the job of looking after those industries in a general sense.
We see this attitude also in the extreme chagrin among Conservative Members at the turn-found in the 95 per cent. publicly-owned company of British Leyland. They cannot say too much, of course, because it was they who would have allowed Leyland and Chrysler to go to the wall. When there are very slow signs in British Leyland—we are at the beginning of the road but the signs are undeniable—of a turn-round, they must keep a low profile because they cannot be seen to be too vicious in their attacks. But that is what they feel.

Mr. Geoffrey Dodsworth: When talking about a turn-round in British Leyland, will the hon. Gentleman bear in mind that £14 million of that represents exchange profits, and that that is exactly the same as the profit disclosed for the period?

Mr. Cryer: I do not deny that. There was a loss of over £20 million last year. To eradicate that loss and to break even, I should think, is a considerable achievement. But the attitude of the hon. Member is that of the Opposition generally—no credit to British Leyland, none to the Government for rescuing it, and none to the workpeople for achieving that turn-round. That is the attitude with which they start—total, doctrinaire, dogged opposition to any support for the nationalised industries—and it is not surprising that the people in those industries are getting tired of their attitude.
The Conservatives talk about accumulated losses by publicly-owned industries, but none of them made any attempt to hive off those industries to private enterprise. They did not hand over the railways, which make losses because they are a social service, to their private enterprise chums. Of course not. They handed over the profitable sections of public industry so that their chums could line their pockets from the profits of those sectors that were making surpluses. We know what their attitude is.
When the Conservatives talk of losses, they conveniently forget that the last Conservative Government held down gas, electricity and postal charges and thereby helped to produce losses. I argue that subsidies to the gas and electricity industries should have been continued for much longer, but the Tories cannot have it both ways. They cannot argue that they are making a loss and at the same time ignore the fact that their Government held down prices and helped to create these losses.
It is recognised that some public industries provide social services, that they are paid for by the community, and are valuable as such. But some make a profit. The mines are an example. Under a Labour Government that industry achieved a turn-round from a considerable loss to a profit, last year, of £11 million. Hopefully, that will be increased this year.
Only yesterday, we had the degrading spectacle of a tawdry conspiracy by the Opposition to delay the passage of a Private Bill because of their dogged and doctrinaire commitment to private enterprise. They were opposing a successful and profitable section of public industry. The British Transport Docks Board report and accounts for 1975, which were available in the Vote Office for a week before yesterday—a fact which very few of them tried to find out and consequently raised innumerable points of order yesterday—contains, in the chairman's statement, the following passage:
Despite the fall in available traffics, by effecting economies, the Board achieved a surplus, after historic cost depreciation before interest of £12·5m. This was an improvement. disregarding inflation of £0·4 million.
That is something of an achievement which I noticed in the balanced statement of the hon. Member for Arundel was not given recognition. There is a success side, and it ought to be recognised. The Opposition make political capital out of not doing so. There are faults and we want to see them eradicated. We wish to eradicate the lack of democracy, which perhaps makes nationalised industries bureaucratic and corporate in their general appearance and effect. The Government are doing something about it—perhaps not at a fast enough pace, but they are starting.
We have heard a good deal about the mixed economy. Opposition Members claim that public ownership will not rescue anything or get the nation out of the mess, but they chose not to ignore that solution when Rolls-Royce was in a mess and 35,000 jobs were at stake. They chose public ownership. We cannot take an isolated example and say that it represents the whole of Conservative philosophy. The Tories have nationalised before. Before the war they brought BOAC into public ownership. When it suits their book they will undertake public ownership if circumstances force them to do so.
The notion that the Conservatives advocate, that the mixed economy is fixed by some sort of magic and handed down on tablets of stone, is ludicrous. Of course we accept the mixed economy, but that it not to say that 20 per cent. public ownership and 80 per cent. private enterprise is fixed for all time. The


majority of the means, distribution and ownership of production is in private hands. If there is a crisis, as the Conservatives say, it is a crisis not of the public sector but of the private sector. It is a crisis of capitalism. Capitalism dominates this country. It is not a tiny, withering bloom somewhere in the corner of the economy. If the economy is sick, we should look at the basis of the sickness and at the capitalist system that has engendered the crisis.

Mr. Nicholas Winterton: Have a look at the high taxation.

Mr. Cryer: Of course, have a look at high taxation. I recommend the eleventh edition of the CBI volume "Comparative Taxation in Western Europe", in which are a few revelations, one of which is that we have the most generous provision in Europe for depreciation. If the depreciation allowances, tax allowances and grants given to firms are taken into account, the taxation position in this country is by no means as onerous as some hon. Members suggest.
One of the failures of capitalism is that, in spite of these inducements, in spite of the bribes to the capitalist system, in spite of the offer of tax allowances to firms which go to the North-East—local authorities are competing with each other to sell their towns without any plan in an absurd competitive struggle—there are still high rates of unemployment in the North-East, Wales and Scotland. That is not due to a failure of public ownership, it is because private industry seeks profits and places profits before people. We want to be able to ask the private banking sector to take industry into account when it makes investment decisions. When those investment decisions are taken in private we cannot do that.

Mr. Nicholas Fairbairn: Unemployment in Scotland has got steadily worse the larger the public sector. Will the hon. Gentleman tell us what the public sector has done to improve the unemployment situation?

Mr. Cryer: I am interested that the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) should intervene, because he was one of the Opposition Members who voted against Chrysler. It was startling that he should

have done that, because no one would deny that Government, action using public money to support Chrysler in this country, saved about 50,000 jobs. Does the hon. and learned Gentleman deny that jobs were saved in Scotland, at Linwood? We have a crisis, but it is caused by the system that the hon. and learned Gentleman supports. It is caused by individual capitalists who are not prepared to make investment decisions.
The House will recall the golden words of a former Conservative Prime Minister —the right hon. Member for Sidcup (Mr. Heath)—who told the Institute of Directors in 1973 "You asked us to devalue, so we floated the pound. You asked for tax concessions and we gave them to you, but still you did not invest." That is on the record. A Conservative Prime Minister begged industrialists to make investment decisions, but they would not. They were shovelling money abroad because they could make a faster buck there than by investing in the people of this country. That, too, is on record.
My criticism applies to the generality of companies, but not to all. There have been good investment decisions. There have been good companies, which have invested in their own men and machines—but, sad to say, that is not the general picture of British industry.
In our manifesto we are committed to make power in industry genuinely accountable to the workers and the community at large. That cannot be done unless there is control over investment decisions, because in British industry those decisions represent an important source of power. Therefore, although this Government are not committed to the public ownership of banks and insurance companies, the Labour Party and the trade union movement are involved in discussing and policy making so that a future Labour Government can implement that policy. I do not suppose that anyone would deny that the secondary banking system needs a greater degree of control. Decisions made by it represent some of the ugly faces of capitalism.
Are we to build up a whole bureaucracy to control a section of capitalism to make it behave well, when we know that capitalism is not for the community's benefit, or are we to look at the whole question of control? Can we separate control from ownership?

Mr. Nicholas Winterton: Will the hon. Member for Keighley (Mr. Cryer) pay attention to the excellent records of some companies, in particular ICI? That company's investment record is fantastic. Its worker-management relationships are outstanding. Its profitability and its export record are outstanding. Will the hon. Gentleman comment on that?

Mr. Cryer: We are committed to a number of decisions, and this is an area where the National Enterprise Board could certainly review the position.
The February 1974 manifesto says:
We shall also take over profitable sections or individual firms in those industries where a public holding is essential to enable the Government to control prices

Mr. Nicholas Winterton: They can now.

Mr. Cryer: The hon. Gentleman believes that the Price Code is totally effective and overwhelmingly supported by the people.
We also have the right to
stimulate investment, encourage exports, create employment, protect workers and consumers from the activities of irresponsible multi-national companies, and to plan the national economy in the national interest.
Can we do all those things simply by building up legislation and bureaucracy to watch private enterprise to ensure that it does those things? One cannot ensure that all those decisions are made without some element of ownership. One of our key methods of ensuring that the investment goes to the areas in which it is needed is the National Enterprise Board, which does not have enough money. This has been mentioned in relation to the public expenditure White Paper. Criticism of Finance for Industry can be advanced. That device has not been very successful. Its decisions to advance money have tended to undermine the position of the National Enterprise Board.
In his speech, my right Friend the Chancellor of the Duchy of Lancaster depended a great deal on the board. but he did not mention planning agreements. We are not getting ahead with them very quickly. If we are to control the economy and stage a recovery we need to imple-

ment them as well as provide the Board with more money. We must ensure that organisations such as the NEB are not throttled by other bodies, like the FFI.
The Labour Government have done much that is good, but one of the acid tests must be employment. We still have 1,300,000 people unemployed.

Mr. Nicholas Winterton: Under Labour.

Mr. Cryer: It is a serious indictment of private enterprise capitalism, which is in some form of crisis in the whole of Western Europe. It is the Labour Government's duty to reverse that crisis. They can do it only by implementing Socialist measures, by planning. That is the sort of thing that will bring down the level of unemployment, which is a crucial test for the Government.

8.53 p.m.

Mr. John Moore: I must thank the hon. Member for Keighley (Mr. Cryer), because he totally destroyed the red herring drawn across the debate earlier by the rather delicate language of the Chancellor of the Duchy of Lancaster. I respect the hon. Gentleman's honesty, despite the total irrelevance of his words. He reminded us of the essence of the debate, which is about to what is and is not a public enterprise or public ownership.
I am delighted that the Secretary of State for Energy is to wind up the debate. In a committee that he chaired, some of us were involved in the beginnings of interesting discussions on some of the mechanisms we might wish to examine, rather than the constantly sterile approach to what is and is not a public enterprise system.
I was particularly pleased to listen to the hon. Members for Thornaby (Mr. Wrigglesworth), Sowerby (Mr. Madden) and Luton, West (Mr. Sedgemore), who drew the debate towards some more basic and fundamental points. I should like; to try to argue on those points. After all, in this debate we are seeking to argue about whether industries that are not now nationalised should be nationalised.
It seems a little distressing to be reminded by the Government Front Bench that Government policies presumably are not based upon the Labour Party's 1918
constitution. I do not know whether Clause 4 of the Labour Party constitution has been totally disavowed by the Government Front Bench tonight, but it seemed very much like it.
The hon. Member for Keighley reminded us that we were debating a past filled with failure, though not necessarily because of the men and women who serve in the nationalised industries. The hon. Member for Thornaby made some valuable observations about the demand problem of funds as opposed to the supply problem, which had a direct relevance to the attempt to nationalise the banking and insurance sector. He stressed that this was the key area. I emphasise his words. He talked about the degree to which the current structure of interest rates in Britain, designed to attract overseas investment, has in many ways acted as a prime impediment to domestic industrial investment. This is an area in which we should be much more interested rather than holding a ragbag political debate.
The hon. Member for Keighley should remember that we are arguing about the need to take over supplies of funds. In that context we should ask ourselves what has already happened in the best of our nationalised industries in terms of their use of funds and the supply of those funds. This is the political crux. I have been doing some comparative work in which I have sought to answer some of these fundamental questions by taking overseas industries and comparing them if I can—it is difficult—with like industries in this country.
For example, the electricity supply industry, which is one of the best managed in this country, is roughly comparable in terms of size of the population it seeks to serve with the electricity supply industry in the States of Pennsylvania, California and New York. There is a consuming population in this country of 50 million people if we exclude Scotland. [HON. MEMBERS: "Oh."] I am sorry but hon. Members will know that Scotland is excluded by virtue of the way in which the electricity supply industry is organised. The electricity supply industry in this country has had the ability to draw funds from Government sources since it was nationalised. If we examine its published accounts for the past five years it will

be seen that it has spent about £541 million per annum of new capital.
The hon. Member for Luton, West referred to source of funds. He was right in his facts but wrong in his analysis. He drew attention to the fact that the industry's source of supply was internal as opposed to external and that, as there was a switch going on in this respect, there might be a need for governmental institutions.
The three States in America have attracted £1,372 million per annum over those same five years. That compares with a figure of £541 million for this country. Of that figure for the three States, 75 per cent. was provided by the public market, by private investors. They were willing to subscribe to private enterprise companies. This denies the argument used by Labour Members below the Gangway. Why is this? I accept that the blame should not be laid at the door of the men and women who seek to try to run our nationalised industries. It should be laid squarely at the door of this House.
There is no doubt that anyone who seeks to analyse the nationalised industries must quickly develop a sense of total despair for those who seek intelligently to manage them. It is impossible, when they operate in a political society such as ours, when Governments of both parties over the past 30 years have consistently failed to allow those industries to be independent. They have been seeking commercial viability as well as fulfilling certain social obligations. Both parties have manifestly failed.
I cannot, in the minute left to me, itemise the obvious areas in which Governments seek to intervene. There is the redistribution of income, the attempt to force investment, the direction of prices and the decisions about which projects should be pushed forward in the national interest. There are many areas where Governments of both parties have consistently failed to allow these industries to be properly managed. To that extent it is not unreal for Members on this side to suggest new forms of organisation and to deny the possibility of further nationalisation until new and better forms are created, because the record is quite staggering.
In the last 30 years the nationalised industries have consistently lost money


for this country. According to parliamentary Answers, this has happened in 21 out of the last 30 years. They have lost a total of £1,096 million. But those are just the declared losses. The capital debt and Revenue write-off has been £3,750 million, and the subsidies, compensation and other payments amount to £4,181 million.
It is apparent that they are financial failures. Therefore, surely it behoves the House of Commons to go beyond a simple static analysis, and a proposal to increase the size of nationalised sector.
All the Opposition have sought to do in the debate is to reduce what is already an outdated programme. I welcome the commitment of the Government Front Bench, therefore, to a denial of Clause 4 in their programme.

9.2 p.m.

Mrs. Audrey Wise: It is obvious that a debate such as this was bound to range considerably around the question of investment. I was grateful to my hon. Friend the Member for Thornaby (Mr. Wrigglesworth), who pointed out that in his view the trouble has been not in the supply of funds for investment but rather in the demand. I am now hoping that my hon. Friend will lead a deputation to our friends at the Treasury who drew up the White Paper on Public Expenditure, which foreshadowed cuts precisely to release funds for investment—funds which I now understand have been available all the time.
Although the debate is centred on banking, insurance and pharmaceuticals, I was very interested in the stark honesty and clarity of the hon. and learned Member for Darwen (Mr. Fletcher-Cooke), who introduced the motor industry into the debate. I am sure that my constituents, many of whom work for Chrysler and British Leyland, will be fascinated by his analysis. He very kindly told us that the Chrysler workers are working very well now because, despite the Government's rescue of Chrysler, power lies still in Detroit, and Chrysler can be closed and the workers sacked. Industrial relations at Chrysler, he suggested, have therefore been transformed.
My constituents who work at Chrysler will be very pleased to know that they are full of fear and that it is good for them.

My constituents at British Leyland will equally be pleased to know that they are relying on the Government keeping them in idleness and sloth, because they are telling me of their interest in having British Leyland effectively and efficiently managed. They are bringing forward many suggestions for this. But the hon. and learned Member for Darwen does not know this. I hope that the Conservative spokesman who winds up the debate will tell us whether he shares the view of his hon. and learned Friend the Member for Darwen about the way to treat workers.
I contrast that attitude with the solicitude of the hon. Member for Henley (Mr. Hesetine) about people with money to invest. He says that it is wrong to make people do what their best judgment tells them not to do. I wish that he would extend that principle to workers and try to support us in our efforts to find channels and mechanisms whereby workers can influence the decisions affecting their work.
I was sorry that the Chancellor of the Duchy of Lancaster appeared to agree with the hon. Member for Henley and said that we must not dragoon the funds of banking and insurance into investment. I was also interested in his reason, which was that we must protect the savings of people. I should have thought that, if their savings could be used to protect their jobs, that would give them the opportunity to have more savings. Therefore, would it not be beneficial to take the view that, if investment is good for the country and if it helps to create wealth, it would not be against the interests of working people if their savings were channelled into productive industry instead of, as so often happens, into property and other non-real-wealth-producing activities.
The Chancellor of the Duchy of Lancaster said that profitability was not a perfect yardstick for determining the allocation of resources but that it was pretty good. I am glad that he recognised that it was not perfect. I suggest that he looks round the word to see the situation which has been produced largely by the yardstick of profitability, with its obscene contrasts of cruelty and wastefulness which exist. If he does that, I think he will agree that he made a slight understatement when he said that it was not perfect.
I suggest, too, that my right hon. Friend looks at the domestic situation which has been produced, in which industry has been starved of investment and such investment as has been made has often been misused. I suggest that the magic yardstick of profitability has not even satisfied the criteria and requirements of the market, since, in the motor industry, for example, we do not appear able even to produce models such as Land Rovers which can be sold and we are told constantly that there is overcapacity and the misuse of capacity, all achieved by this less than perfect yardstick.
By the time that my right hon. Friend makes his next speech to the House, I hope that he will have decided to be a little more firm and realistic—that is a good, popular word on both Front Benches—in his definition of the function of profitability as a yardstick for the allocation of resources.

9.7 p.m.

Mr. Angus Maude (Stratford-on-Avon): I said that I was prepared to give up five minutes to the hon. Member for Coventry, South-West (Mrs. Wise) if she wished to address the House, and I am glad that I did, because it was worth a guinea a minute. I hope that the Chancellor of the Duchy of Lancaster noted her injunctions.
The right hon. Gentleman and the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) both said that they could not quite understand why the Opposition, on a Supply Day, tabled a motion dealing with the Government's intentions about the nationalisation of the banking, insurance and pharmaceutical industries because, as the right hon. Gentleman said, this was only some policy document which had been produced within the Labour Party. As I think the Government will recognise, this is a matter about which some quite threatening noises have issued from the Labour Party, both in and out of election manifestos, for some years, and the production of a new policy document was clearly liable to increase the uncertainty.
The one fact that is quite certain is that this debate has been valuable, and that tabling this motion was not an error. In fact—although I wish to study the right hon. Gentleman's words with some care

to decide exactly how far his commitment goes—contrary to what Government supporters below the Gangway were hoping, his speech went a long way to remove for at least a period the uncertainty under which these industries were labouring.
I deal with the three industries which are named in the Opposition motion. The right hon. Gentleman said that the Government "had no intention of nationalising any company within the banking industry". We are entitled to take that as a clear pledge by the Government for the period of this Parliament. I cannot see that it can mean anything else. It certainly does not stop hon. Members on the Government Benches from trying to change the Government's mind, and it is perfectly clear that many of them want to do so. But it must be considered as a pledge for the lifetime of this Parliament.
When the Chancellor of the Duchy came to the insurance and pharmaceutical industries, his wording was a little different. Whereas with banking he said that the Government had no "intention of" nationalising any company, with the others he said the Government had "no plans to" nationalise companies in the insurance or pharmaceutical industries. There may be a subtle difference in intention between "no intention" and "no plans". I take it that "no intention" means that they will not even consider it within the lifetime of this Parliament. However "having no plans" can mean that they have not yet worked out anything, but are not committed not to produce something later in the lifetime of this Parliament, which could eventually find it ways into legislation.

The Secretary of State for Energy (Mr. Anthony Wedgwood Benn): In 1970 when the Conservatives came into office did they have any plans or any intention to nationalise Rolls-Royce?

Mr. Maude: That is a singularly inept intervention even by the Secretary of State's standards. It had never been part of the doctrine, dogma or constitution of the Conservative Party to nationalise companies. We had no intention to nationalise Rolls-Royce, and no plans to do so. As the right hon. Member knows perfectly well—as well as anyone on his Front Bench or the Front Bench below the Gangway—the nationalisation of the


aero-engines division of Rolls-Royce took place simply because our defence commitments to allied and friendly Governments were such that to allow the company to fold up completely would have been a breach of our international obligations and would have had a serious effect on the Alliance. The crisis having arisen, it is too futile for the Secretary of State to try to put Rolls-Royce—when the situation had not even been envisaged at the time of the election—on a par with the banking, insurance and pharmaceutical industries, about which the Labour Party has been issuing documents and threats for many years, clearly with the intention of trying, one day, to get a party conference or a Government to nationalise these industries, or sections of them.
The point surely is that if the Labour Party is still bound by Clause 4 of its constitution and is devoted to the nationalisation of the means of production, distribution, and exchange, and since, under Clause 5 of its constitution, the machinery exists by which this can happen, whatever the Government of the day might think about it, we are entitled to suppose that there is at least a risk to these industries.
The Chancellor of the Exchequer was saying in 1973 that they were doing work to see how they could bring sections of the banking industry under public control. Let us take it that the Chancellor of the Duchy of Lancaster has authority to say that under no circumstances during this Parliament will the Government nationalise the whole, or any section of, or any firm in, any of these three industries.

Mr. Cryer: I take it that the hon. Gentleman would not deny the right of the Labour Government to take the sort of action that his Conservative Government took over Rolls-Royce. He is not seeking to deny that kind of right, is he?

Mr. Maude: If one of the major clearing banks were to collapse totally—which, frankly, I do not envisage happening even under this Government—the Government might find themselves in a crisis situation, when they would have to ask the House for special powers. The Rolls-Royce situation has no relation

whatsoever to a doctrinal commitment to try to nationalise these industries.
The Chancellor of the Duchy of Lancaster went on to say that the Government were doing pretty well in medium-term lending to industry and that the commanding heights of the economy were already controlled by the Government, and they had no need to own them.

Mr. Lever: These commanding heights.

Mr. Maude: The commanding heights represented by banking, insurance and the investment machinery of the country. He said that these commanding heights were already controlled by the Government and they had no need to own them. That provoked an immediate eruption from the hon. Members for Luton, West (Mr. Sedgemore) and Bolsover (Mr. Skinner). There had already been an intervention from the hon. Member for Liverpool, Walton (Mr. Heifer), who said that whatever the Chancellor of the Duchy of Lancaster said and the Government might decide, the party might have other ideas and might decide that this was necessary.
Nobody on this side of the House succeeded in denting the conviction of the Chancellor of the Duchy of Lancaster or, indeed, of the hon. Member for Thornaby (Mr. Wrigglesworth) that the banking industry of this country was doing pretty well in the circumstances and that the Government had all the means necessary for controlling the money supply and investment. The hon. Member for Luton, West said that it was not a question whether the banks should be nationalised, but who will do it, and when, and he even suggested that a Conservative Government might find it necessary to do it.
The hon. Member for Luton, West went on to give a fairly detailed analysis of the investment mechanism in this country and said—and I was interested in his argument—that the fact that, owing to the narrowing of profit margins, there had been a massive shift from internal financing from retained profits to external financing was a desirable trend and that it should be retained as a deliberate matter of Government policy. He said that profit margins should be kept low with that in view.
What the hon. Gentleman did not recognise, but what the Chancellor of the Duchy of Lancaster does recognise, is that if profit margins are deliberately kept low and there is little chance for companies to build up reserves, workers' jobs are made that much less secure when business falls off or world trade declines. It is clear, and I am glad to see it from all the evidence of opinion poll surveys, that workers in most industries recognise that their jobs are safer in a company that is making profits than in one that is not. I think that the hon. Member for Luton, West has misunderstood not only the function of profits in financing industry but also the wishes of the workers in those industries.
Getting back to the question why the Opposition tabled this motion, we are entitled to look at the risks under which these industries have been living, the chance that the Chancellor of the Duchy of Lancaster's assurances will hold and the machinery by which a reversal of his assurances may take place.
It is not easy to understand the process by which the Labour Party goes through these things, but I understand that research departments produce a series of proposals for policy committees—just as happens in the Conservative Party and probably most other parties.
The proposals can then be sent to the National Executive Committee, although at that stage it is possible for the Prime Minister to say, as has the present Prime Minister, that he does not think a certain proposal looks like a runner. He has to admit, however, that the decision may be up to the party conference.
The NEC may approve or reject a proposal, according to how many Ministers attend the meeting or the balance between Left and Right on any occasion. If the NEC passes the proposal, it goes to the party conference, where a two-thirds majority will virtually ensure its inclusion in the manifesto, though this is subject to a joint meeting of the NEC and the parliamentary committee of the Parliamentary Labour Party.
It is interesting to see how often despite warnings from Ministers that it would not be a good idea to include a particular proposal in the manifesto, in the national interest, or for other reasons, the proposals get into the manifesto anyway,

and, when the Labour Party next scrapes an overall majority, into legislation and passed into law.
It is clear that there is risk and uncertainty. It is no good the Chancellor of the Duchy saying there is no risk just because the Government have no present plans for nationalisation.
The process by which the Labour Party gets policy proposals into its manifestos and into legislation sounds a little like Russian roulette, the only difference being that while the chamber is spinning, the revolver is pointed at someone else and not at the person who is to pull the trigger. When the Chancellor gives us his assurances, we are entitled to say that the voice is the voice of Jacob, but the finger on the trigger is a little hairy.
There has been no serious attempt tonight to argue that there is a case for nationalising the whole or even sectors of the banking, insurance or pharmaceutical industries.
The Chancellor of the Duchy of Lancaster is correct in saying that the Government have all the powers they need to control the money supply, and so on.
If it is argued that the clearing banks are in a monopolistic or semi-monopolistic situation, we disagree. They do not represent the majority of the lending capacity in this country. Anyway, under the monopolies and restrictive practices legislation the Government have powers to deal with this matter. They obviously do not think it is necessary that they should.
It is interesting that no one from the Labour Benches has attempted to argue that there is a case for nationalising the insurance industry, or even sectors of it. It is strange that it should so frequently figure in Labour Party policy documents but that no one should have argued the case today. Indeed, even the distant threat of it has appeared in Labour Party manifestos.
We know that the Chancellor of the Duchy of Lancaster has not actually read the Labour Party manifestos—he made this clear—on the pharmaceutical industry. The position in respect of that industry is perhaps the most interesting of the lot. There is no doubt what the February 1974 Labour Party manifesto stated. I am delighted to be able to


inform the Chancellor of the Duchy about it. It stated:
We shall"—
it is not "we may" or "we are thinking of"—
also take over profitable sections or individual firms in those industries where a public holding is essential to enable the Government to control prices, stimulate investment, encourage exports, create employment, protect workers and … plan the national economy in the national interest. We shall therefore include in this operation sections of pharmaceuticals, road haulage, construction, machine tool industry…".
There could not be anything much clearer than that. The right hon. Gentleman has admitted that he has not read it.
A more interesting point about the most recent proposals for the pharmaceutical industry comes in a document entitled "Public Control of the Pharmaceutical Industry", which was produced under the chairmanship of the Minister of State, Department of Health and Social Security. It says that as a matter of urgency the National Enterprise Board should acquire at least one British research-based pharmaceutical company.
The report continues—I hope that the Chancellor of the Duchy will note this, because it bears out his determination not to have any nationalisation in this industry:
from our examination of the industry we believe that it would be impracticable to nationalise the whole of the pharmaceutical industry".
It justifies that determination on the grounds that it would:
merely ensure a higher drug bill for the National Health Service".
One could not want a more dogmatic assertion that nationalisation in the pharmaceutical industry would be wrong, and that the result of nationalising the whole industry would be to ensure a higher drug bill.
However, the whole argument that Labour Members on the left of their party produced for nationalising the pharmaceutical industry was that pharmaceutical companies had been making excessive profits. They insisted that promotional expenditure was far too high, including samples given to doctors and advertising, and that the patient was not getting his drugs at a reasonable price. But the report says that to nationalise the whole industry would

merely ensure a higher drug bill for the National Health Service.
We hope that the Secretary of State will explain how nationalising one firm in the industry would make things markedly better. The fact is that our National Health Service patients and other patients get their drugs, as is well known, cheaper than in almost any other advanced industrial country in the world, and that the research effort is better than in almost any other advanced industrial country in the world.
In the case of banking, it is quite clear that customers, by and large, are extremely satisfied with the handling of their accounts. A recent survey in Money Which?—showed that 87 per cent. of customers had expressed themselves as satisfied with the handling of their accounts.
The Prime Minister, who I am glad to see has now honoured us with his presence, was called upon to make some comment on the policy document which we are discussing. He felt it necessary to say with some force that he disagreed with quite a lot of it. He also said—I thought that this was interesting—that he was told that over 700 voluntary experts in various sectors had contributed to the document.
The right hon. Gentleman, according to the news release from the Labour Party Information Department, said:
In some ways this shows up in the nature of the document because it is in essence the total sum of all their hopes in all the fields of social expenditure and elsewhere.
That may be the total sum of all the hopes of those below the Gangway, but not, it would appear, of the Government Front Bench if the speech by the Chancellor of the Duchy is anything to go by.
But what interests us, particularly when right hon. Gentlemen opposite say that we were wrong to try to dispel uncertainty from these industries by having a debate this evening, even after the Chancellor of the Duchy has given what is very nearly a categorical pledge that the Government will not nationalise any firm in the banking, insurance and pharmaceutical industries, is what the Government have done. They do not accept our motion, which would be the obvious thing to do. If they had read our motion,


they would have seen that it simply calls on the Government to dispel uncertainty in these industries by giving a categorical assurance that they do not propose to nationalise any firm in the banking, insurance and pharmaceutical industries.
The Chancellor of the Duchy purported to give that categorical assurance. Why, then, did the Government not accept our motion? Instead, they have attempted to substitute for it an amendment that has no relation to the motion.
You, Mr. Speaker, must be convinced that the amendment is relevant; otherwise, it would not have been called. But I must point out that it mentions nothing about the banking, insurance, or pharmaceutical industries, and nothing about the restoration of confidence in them. The amendment is designed to get all mention of the banking, insurance and pharmaceutical industries off the record and to allow the Secretary of State for Energy to have a little run around the houses with his speech about the past successes of the NEB and its anticipated future triumphs.
We do not grudge the right hon. Gentleman his little speech. We recognise that he has been feeling a little lost and lonely out in the North Sea over the last few months. We shall be delighted to listen to his speech. If he can possibly relate it to the subject of the motion and confirm that he—the white hope of the left wing of the Labour Party—also categorically assures us that the Government, and preferably the whole Labour Party, have no intention of nationalising any firm in these industries, the operation will have been worth while. But I do not think this is the total sum of all their hopes. It is the total sum of a great deal of nonsense and a great many betrayals by a lot of hon. Gentlemen on the Government Benches.

9.33 p.m.

The Secretary of State for Energy (Mr. Anthony Wedgwood Benn): The House will be grateful to the hon. Member for Stratford-on-Avon (Mr. Maude) for having discovered and explained to the House the provisions of the Labour Party constitution, which has been available since 1918. The detailed and meticulous way in which he described what we have been doing since the party was founded

will be much appreciated. I want to put that on the record.
I confess that, listening to the hon. Member for Henley (Mr. Heseltine), after a year, I had a slightly wistful feeling. I have missed him a great deal with his James Bond act of producing documents which we published months ago as if he had got them by some secret agent method and was warning us about them. I see him using the instrument of fear as it has been used over the years. It was Attlee, once, Laski, Lloyd George and no doubt his predecessors. It goes back to Gladstone. I believe that if the hon. Gentleman had lived when Christ turned the money changers out of the temple, he would have moved a censure motion that their activities were damaging the viability of the temple. The hon. Gentleman is a royal warrant holder, by appointment, as purveyor of damaging uncertainty to the United Kingdom.
He has done it time and time again. His most vigorous activities were between February 1974 and October 1974—which led to a larger Labour majority. He is the fund-raiser of the Conservative Party. Once one gets clear in one's mind that when the funds are low the hon. Gentleman is put on to move a motion of censure about public ownership, one understands what it is all about.
I do not recommend the House to pass the motion. What we have invited the House to do, by our amendment, is to endorse the developing strategy and the rôle of the National Enterprise Board and the importance of the tripartite discussions at the NEDC, which have given the trade unions a very much larger part in industrial policy-making, and to endorse again the principles and objectives of the Industry Act 1975.
The history of public ownership in the United Kingdom is very long. If I exclude what Henry VIII did in respect of the Church of England and move on to the Post Office, from then right on until today successive Governments of different parties have regularly brought essential industries into public ownership. Indeed, it was Mr. Winston Churchill —I shall quote from him shortly—who brought the Anglo-Persian Company into public ownership, and the Conservative Party has many companies to its credit.


I think it was the Conservative Party which brought in electricity, the BBC and Imperial Airways before the war. The pressure for public ownership has usually come from the workers in the industries concerned. Certainly the coal miners campaigned from before the First World War to bring their industry into public ownership.
But more recently, the reason why, in our manifesto and in the industrial policy of the Government, we have returned with added interest to the rôle of public ownership is that we believe it to be relevant to the twin questions that concern this country. One is the chronic lack of investment that we have suffered since the war. The other is the poor industrial relations associated with that period.
Even in the period when the Conservatives were in power they tried everything they knew—and I do not blame them for it—including speeches up and down the country, to urge business men to invest, but there was a fall in investment when the Conservatives were in office. The poor industrial relations, which have been a part of our post-war history, culminating in the confrontation of February 1974, and the three-day working week, I suppose, must have been —[Interruption.]. It was the electorate that threw the right hon. Member for Sidcup (Mr. Heath) out of office. It was not the Conservative Party. It was the electors who rejected his policy.
This has been associated with a long period of relative decline and de-industrialisation. Any hon. Member, in his constituency capacity, who has had anything to do with manufacturing industry, knows that in sector after sector, lack of investment and poor industrial relations have gravely affected Britain's capacity to compete world wide.

Mr. Nicholas Winterton: Will the right hon. Gentleman give way?

Mr. Benn: The hon. Gentleman did not take part in the debate. He has attended only the last few moments of it.

Mr. Nicholas Winterton: That is not true.

Mr. Benn: Perhaps the hon. Gentleman will allow me to develop my case.
In West-Central Scotland, in Merseyside, in the North-East, in parts of Wales and now in the Midlands, more and more communities—not just workers and their families, but communities—are paying the price for a failure to deal with these two problems. There is no doubt that in the post-war years, the post-war boom in world trade coupled with the fact that British industry had not been destroyed as industry had been in many of our competitor countries, concealed the fact of our failure to invest adequately. When the oil price increase came in 1973, and we were struck by the world slump, that weakness was revealed.
It is not part of my argument to seek to blame managers, shareholders, workers, Ministers or Members of Parliament. We believe that what was wrong was a basic incapacity to deal with these problems. Successive Governments, including Conservative Governments have sought to deal with this problem by massive intervention in industry. There is no argument about that. They sought to deal with it by massive subsidies, regulations, incentives, inducements, grants, loans and controls. Indeed, both parties, if we are fair, have adopted methods of public ownership—admittedly mostly by the party of which I am a member—of coal, gas, railways, steel and the Bank of England, the last of which was not mentioned today. One would think that in a debate on banking we would have had a denunciation of the rôle of the Bank of England under public ownership, but not at all, although it was much argued about at the time that Hugh Dalton brought the legislation forward.
Whenever public ownership has come into industry, damaging uncertainty has been removed and massive investment programmes have taken place. If any hon. Member has ever bothered to speak to those who work in the public sector, he would recognise the pride which they have in their work. They would all say that there has been a higher level of technology, a higher level of public responsibility and a sense of service under which those in the nationalised industries work.

Mr. William Clark: rose—

Mr. Benn: The hon. Gentleman has not found it possible to attend the debate and I should like to be allowed to develop my argument.


Public ownership was accepted, however grudgingly, by the Conservatives when in power. Apart from the halfhearted attempt to denationalise steel, the only thing they screwed up their courage to do was to give the Carlisle pubs back to the brewers in discharge of an old debt the Tory Party has always owed to that business. But, in general, the Conservatives have greeted and accepted public ownership and, as best they might, tried to work with it.
Of course they preferred to nationalise industries that lost money. That is why Rolls-Royce was brought in by them in 1972. Whenever they got industries nationalised they liked to force them to lose even more money, as they did by driving them into the red in the period from 1970 to 1974. They found that very convenient because forcing the nationalised industries to lose money served the twin purposes of subsidising the private sector with loss-making public services and of enabling them to use that as an argument against public ownership.
Of course, they added to that the most generous subsidies to the private sector direct. In the period during which the previous Conservative Government were in power, more than £700 million a year —£2 million a day—was being provided for the private sector. May I make this quite clear? The Labour Party and the Labour Government do not accept a public sector made unprofitable by Government action and a private sector made profitable by Government subsidy. That is not the basis on which we think these matters should be considered.

Mr. Ian Lloyd: rose—

Mr. Benn: The hon. Gentleman also, unfortunately, missed the debate but Hansard will be available for him tomorrow.

Mr. Lloyd: On a point of order, Mr. Speaker. The right hon. Gentleman knows full well he is misleading the House by giving the impression that the private sector—

Mr. Speaker: Order. That is not a point of order.

Mr. Benn: The Opposition spokesmen today were a little too modest about their role in respect of public ownership and

investment. The Conservatives brought Rolls-Royce into public ownership and they maintained the Giro which my right hon. Friend the Prime Minister as Chancellor of the Exchequer and I as Postmaster-General introduced in the previous Government. I am advised that Giro now has a turnover of about £25 million a year and meets a very real public need.

Mr. Hugh Dykes: rose�ž

Mr. Benn: The hon. Member for Harrow, East (Mr. Dykes), too, was detained elsewhere. Perhaps he will allow me to finish my speech.

Mr. Dykes: On a point of order, Mr. Speaker. I appreciate that any Minister has a right not to accept an intervention, but is it in order for a Minister to choose as his exclusive reason for not giving way the fact that an hon. Member was unable to be in the House?

Mr. Speaker: I never decide the reasons that Ministers give.

Mr. Benn: I was listing—

Mr. Dykes: rose�ž

Mr. Speaker: Order. The hon. Member for Stratford-on-Avon (Mr. Maude) who spoke from the Opposition Front Bench was heard in reasonable silence, at least when I was here. I hope that in the quarter of an hour that is left the House will listen to the Minister.

Mr. Benn: I was listing the achievements of the Conservative Party in terms of its relationship with the public sector. In the drugs sector, the Research and Development Corporation set up by my right hon. Friend the Member for Huyton (Sir H. Wilson) has made £32 million on the sale of cephalosporium, which is a public sector drug. The Conservatives forget that the right hon. and learned Member for Surrey, East (Sir G. Howe) came to the House and denounced the excessive profits of Hoffman La Roche. Everyone remembers the criticism by the Conservatives. It was the Prime Minister of the day who attacked the "unacceptable face of capitalism". It was the Conservatives who put £3,061 million during their four years in grants and subventions into the private sector. They passed the Industry Act 1972 which estab-


lished a sort of public bank—that is what it was about—with the statutory power to take equity.
I pay tribute to the previous Conservative Government. In the period when I was Secertary of State I brought into public ownership by their legislation 62 companies, including subsidiary companies—Court Line, British Leyland, Ferranti, Alfred Herbert. I must pay one final tribute. The most successful cooperatives at Meriden and Kirkby were made possible by legislation introduced by the Department of Trade and Industry when the hon. Member for Henley was a Minister.

Mr. Michael Marshall: I am grateful to the right hon. Gentleman. I have been here thoughout the debate, as he knows During my speech I asked him to get away from the party political angle. Before he sits down will he speak to the motion on the Order Paper?

Mr. Benn: Not only was I not being party political, I was paying tribute to the legislation which we inherited that allowed us to extend public ownership so successfully before we were able to introduce our own Act.
Unfortunately, during the period of the previous Government investment slumped heavily and confidence drained away. I have referred to February 1974. It was against this background that the Labour Party worked on the industrial strategy that we are asking the House to endorse. It was based on two simple principles which I wish to put before the House. First, where money goes in on public account there should be public accountability of the appropriate public ownership. That was spelled out most clearly by my right hon. Friend the then Leader of the Opposition in his speech to the conference introducing the policy.
If that is found to be too controversial, let me choose the words of Mr. Churchill in his introduction of the Anglo-Persian Oil Bill in 1914, so that I do not offend against any of the rules. He said:
We knew that by our contract we should confer upon the Anglo-Persian Company an immense advantage which, added to their concession, would enormously strengthen the company and increase the value of their property. If this consequence arose from the necessary action of the State, why should not

the State share in the advantage which we created? If, in any case, we had to go so far, why should we not go a step further? Was it not wiser, was it not more profitable on every count, naval, financial and indeed equitable, to acquire control of an enterprise which we were bound to help and bound to enrich, which we alone could sustain, and on which, to a large extent, we must rely?"—[Official Report, 17th June 1914; Vol. 58, c. 1140.]

Mr. David Steel: rose�ž

Mr. Benn: I will certainly give way. It was for the hon. Gentleman's party that Mr. Churchill was then leading. I see that he does not wish to intervene after all. I do not know whether he was hoping that, were he not to succeed to the leadership of his party, he might follow Churchill to the leadership of another, but that would be entirely a matter for him.
The second principle upon which we fought the election was that those who invest their lives in industry have at least as much right to say how it is run as those who invest their money in it. That is another very old principle which is absolutely compatible with the earning of a surplus for investment, but—this is the point—if people are to tighten their belts to earn a surplus, they have a right to a say in how that surplus is spent.
It is on that basis that the TUC discussions with the Chancellor about the Budget, that the TUC r�žle at NEDC, that industrial strategy, that the planning agreements, that industrial democracy, that the r�žle of the unions in the development of industrial strategy in every industry in which they have a part—it is on that basis—

Mr. John Moore: rose�ž

Mr. Benn: Yes, I will give way. The hon. Gentleman spoke in the debate.

Mr. Moore: I not only spoke but have sat here throughout the debate. I appreciate the right hon. Gentleman's giving way. To the extent that I am not in a church at Oxford and not listening to a lecture and to the extent that he is not going to answer my detailed questions, would the right hon. Gentleman answer one simple question? Would he also commit on behalf of his Front Bench not to nationalise in the pharmaceutical, banking or insurance industries?

Mr. Benn: The hon. Gentleman is helping me along with my speech, but would he allow me to develop it in the way I think best?

Mr. Heseltine: rose�ž

Mr. Speaker: Order. I do not think that the Secretary of State was giving way.

Mr. Heseltine: rose�ž

Mr. Benn: rose�ž

Mr. Speaker: Order. It is no use proceeding like this. If the Secretary of State does not give way, the hon. Member for Henley (Mr. Heseltine) knows that the Minister still has the Floor.

Mr. Benn: rose�ž

Hon. Members: Give way.

Mr. Benn: It is somewhat discourteous of the hon. Member for Henley to seek to intervene before I am able to answer the question put to me by one of his hon. Friends. That answer would be that, as the Chancellor of the Duchy made quite clear, and as my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) consented and agreed in his comment, the Government have no plans in that direction.

Mr. Peter Rost: What about you?

Mr. Benn: At the same time, the hon. Member for Stratford-on-Avon, in his skilful presentation of the Labour Party constitution, made it clear that the role of the Labour Party in the outline and development of industrial policy is an important rôle and that, indeed, it would not be the first time that the party, in preparing for the work of a future Government, would contribute effectively—I mean effectively in the sense that it would happen—by proposals for the future.
Therefore I am confirming what the hon. Member said, if he wants to interrupt me, in saying that I would not go so far as to confirm what he said. He is right in saying that our constitution provides that, in the development of future policy, if the conference takes a view and a manifesto is drawn up and presented and the party wins the election and the House assents to the legislation, it would not be the first time that the

Labour movement had contributed its policy to the future work of a future Labour Government.

Mr. Maude: We are, as the lawyers say, absolutely ad idem on this. Would the right hon. Gentleman just confirm this? It appeared that what he is now saying is that the Labour Party might decide in a future manifesto to introduce proposals in this respect. That is perfectly possible. But did I understand him to confirm what the Chancellor of the Duchy said—that it is not the present 5Governments intention to do anything of that kind in this Parliament?

Mr. Benn: I have answered the question. The speech by my right hon. Friend the Chancellor of the Duchy of Lancaster on public ownership requires to be examined overnight by the House. [HON. MEMBERS: "Oh."] I have confirmed what he said. I adopt exactly the words that he used when he was asked to comment on the words of my right hon. Friend the Chancellor of the Exchequer when the same question was put to him. I have answered the question and I have confirmed, as my hon. Friend the Member for Liverpool, Walton has confirmed, that the Government have no plans in that direction.
I am sorry that the debate has prevented us from discussing some of the problems of the existing nationalised industries which employ 1,750,000 people and are responsible for 20 per cent. of our gross domestic product.
I conclude by saying that the way in which the argument is presented by the Opposition in all these debates is as if the whole threat to British industry lay in Reds under the bed or trade unionists dominating the House of Commons, the Labour Party or country. The reality is very different, and the Opposition cannot accept the truth. The truth is that their analysis of how the British economy should work does not conform to the experience of our people. That is where their real weakness lies.
The Opposition have had to make so many adjustments to their commitment to the ideas of Adam Smith that they are, in effect, trying to amend the Ptolemaic theory of astronomy when there is a Copernican theory now emerging. It is no use the Opposition believing that they can go on kidding the British people,


believing that by patching and an ideological commitment to a system which they do not even use when in power they will be able to drive back from our people the desire for greater public accountability, greater public responsibility and higher qualities of public service, and the desire to use the public sector—be it the National Enterprise Board or the Welsh or Scottish Development Agencies—to try to harness public investment to deal with the problems of unemployment.
The debate has wholly failed in the sense that the Opposition have sought in some way to raise a fear for their

own purposes. The Labour Party won the last two elections on an open programme of public ownership. We have never concealed from the public our views on the desirability of public responsibility and the extension of public ownership. When today's debate is carefully studied by those who follow these matters, it will confirm the wisdom of our work and analysis and give greater encouragement to its progress.

Question put, That the amendment be made:—

The House divided: Ayes 284. Noes 274.

Division No. 148.
AYES
10.00 p.m.


Abse, Leo
Dean, Joseph (Leeds West)
Hughes, Roy (Newport)


Allaun, Frank
Dell, Rt Hon Edmund
Hunter Adam 


Anderson, Donald
Dempsey, James
Irvine, Rt Hon Sir A. (Edge H[...]ll)


Archer, Peter
Doig, Peter
Irving, Rt Hon S. (Dartford)


Armstrong, Ernest
Dormand, J. D.
Jackson, Colin (Brighouse)


Ashley, Jack
Douglas-Mann, Bruce
Jackson, Miss Margaret (Lincoln)


Atkins, Ronald (Preston N)
Duffy, A. E. P
Janner, Greville


Bagier, Gordon A. T.
Dunn, James A.
Jay, Rt Hon Douglas


Barnett, Guy (Greenwich)
Dunnett, Jack
Jeger, Mrs Lena


Barnett, Rt Hon Joel (Heywood)
Eadie, Alex
Jenkins, Hugh (Putney)


Bates, Alf
Edge, Geoff
Jenkins, Rt Hon Roy (Stechford)


Bean, R. E.
Edwards, Robert (Wolv SE)
John, Brynmor


Benn, Rt Hon Anthony Wedgwood
Ellis, John (Brigg amp; Scun)
Johnson, James (Hull West)


Bennett, Andrew (Stockport N)
English, Michael
Johnson, Walter (Derby S)


Bishop, E. S.
Ennals, David
Jones, Barry (East Flint)


Blenkinsop, Arthur
Evans, Fred (Caerphilly)
Jones, Dan (Burnley)


Boardman, H.
Evans, Ioan (Aberdare)
Judd, Frank


Booth, Rt Hon Albert
Ewing Harry (Stirling)
Kaufman, Gerald


Bottomley, Rt Hon Arthur
Faulds, Andrew
Kelley, Richard


Boyden, James (Bish Auck)
Fernyhough, Rt Hon E.
Kilroy-Silk, Robert


Bradley, Tom
Fitt, Gerard (Belfast W)
Kinnock, Neil


Bray, Dr Jeremy
Flannery, Martin
Lamond, James


Broughton, Sir Alfred
Fletcher, Raymond (Ilkeston)
Latham, Arthur (Paddington)


Brown, Hugh D. (Provan)
Fletcher, Ted (Darlington)
Leadbitter, Ted


Brown, Robert C. (Newcastle W)
Foot, Rt Hon Michael
Lee, John


Brown, Ronald (Hackney S)
Ford, Ben
Lestor, Miss Joan (Eton amp; Slough)


Buchan, Norman
Forrester, John
Lever, Rt Hon Harold


Buchanan, Richard
Fowler, Gerald (The Wrekin)
Lewis, Arthur (Newham N)


Butler, Mrs Joyce (Wood Green)
Fraser, John (Lambeth, N'w'd)
Lewis, Ron (Carlisle)


Callaghan, Rt Hon J. (Cardiff SE)
Freeson, Reginald
Lipton, Marcus


Callaghan, Jim (Middleton amp; P)
Garrett, John (Norwich S)
Litterick, Tom


Campbell, Ian
Garrett, W. E. (Wallsend)
Lomas, Kenneth


Canavan, Dennis
George, Bruce
Loyden, Eddie


Cant, R. B.
Gilbert, Dr John
Luard, Evan


Carmichael, Neil
Ginsburg, David
Lyon, Alexander (York)


Carter, Ray
Golding, John
Lyons, Edward (Bradford W)


Carter-Jones, Lewis
Gould, Bryan
Mabon, Dr J. Dickson


Cartwright, John
Gourlay, Harry
McCartney, Hugh


Castle, Rt Hon Barbara
Graham, Ted
McElhone, Frank


Clemitson, Ivor
Grant, George (Morpeth)
MacFarquhar, Roderick


Cocks, Michael (Bristol S)
Grant, John (Islington C)
McGuire, Michael (Ince)


Cohen, Stanley
Grocott, Bruce
Mackenzie, Gregor


Colquhoun, Ms Maureen
Hamilton, James (Bothwell)
Mackintosh, John P.


Cook, Robin F. (Edin C)
Harper, Joseph
Maclennan, Robert


Corbett, Robin
Harrison, Walter (Wakefield)
McMillan, Tom (Glasgow C)


Cox, Thomas (Tooting)
Hart, Rt Hon Judith
McNamara, Kevin


Craigen, J. M. (Maryhill)
Hattersley, Rt Hon Roy
Madden, Max


Crawshaw, Richard
Hatton, Frank
Magee, Bryan


Cronin, John
Hayman, Mrs Helene
Maguire, Frank (Fermanagh)


Cryer, Bob
Healey, Rt Hon Denis
Mahon, Simon


Cunningham, G. (Islington S)
Heffer, Eric S.
Mallalieu, J. P. W.


Cunningham, Dr J. (Whiteh)
Hooley, Frank
Marks, Kenneth


Davidson, Arthur
Horam, John
Marquand, David


Davies, Bryan (Enfield N)
Howell, Rt Hon Denis
Marshall, Dr Edmund (Goole)


Davies, Denzil (Llanelli)
Hoyle, Doug (Nelson)
Marshall, Jim (Leicester S)


Davies, Ifor (Gower)
Huckfield, Les
Mason, Rt Hon Roy


Davis, Clinton (Hackney C)
Hughes, Rt Hon C. (Anglesey)
Maynard, Miss Joan


Deakins, Eric
Hughes, Robert (Aberdeen N)
Meacher, Michael




Mellish, Rt Hon Robert
Roberts, Gwilym (Cannock)
Thorne, Stan (Preston South)


Mendelson, John
Robinson, Geoffrey
Tierney, Sydney


Mikardo, Ian
Roderick, Caerwyn
Tinn, James


Millan, Bruce
Rodgers, George (Chorley)
Tomlinson, John


Miller, Mrs Millie (Ilford N)
Rodgers, William (Stockton)
Tomney, Frank


Mitchell, R. C. (Soton, Itchen)
Rooker, J. W.
Torney, Tom


Molloy, William
Roper, John
Urwin, T. W.


Moonman, Eric
Rose, Paul B.
Varley, Rt Hon Eric G.


Morris, Alfred (Wythenshawe)
Ross, Rt Hon W. (Kilmarnock)
Wainwright, Edwin (Dearne V)


Morris, Charles R. (Openshaw)
Rowlands, Ted
Walden, Brian (B'ham, L'dyw'd)


Morris, Rt lion J. (Aberavon)
Sandelson, Neville
Walker, Harold (Doncaster)


Moyle, Roland
Sedgemore, Brian
Walker, Terry (Kingswood)


Mulley, Rt Hon Frederick
Selby, Harry
Ward, Michael


Murray, Rt Hon Ronald King
Shaw, Arnold (Ilford South)
Watkins, David


Newens, Stanley
Sheldon, Robert (Ashton-u-Lyne)
Weetch, Ken


Noble, Mike
Shore, Rt Hon Peter
Weitzman, David


Oakes, Gordon
Short, Rt Hon E. (Newcastle C)
Wellbeloved, James


Ogden, Eric
Silkin, Rt Hon John (Deptford)
White, Frank R. (Bury)


O'Halloran, Michael
Silkin, Rt Hon S. C. (Dulwich)
White, James (Pollok)


Orbach, Maurice
Sillars, James
Whitlock, William


Orme, Rt Hon Stanley
Silverman, Julius
Willey, Rt Hon Frederick


Ovenden, John
Skinner, Dennis
Williams, Alan (Swansea W)


Owen, Dr David
Small, William
Williams, Alan Lee (Hornch'ch)


Padley, Walter
Smith, John (N Lanarkshire)
Williams, Rt Hon Shirley (Hertford)


Palmer, Arthur
Snape, Peter
Williams, Sir Thomas


Park, George
Spearing, Nigel
Wilson, Alexander (Hamilton)


Parker, John
Spriggs, Leslie
Wilson, Rt Hon H. (Huyton)


Parry, Robert
Stallard, A. W.
Wilson, William (Coventry SE)


Pavitt, Laurie
Stewart, Rt Hon M. (Fulham)
Wise, Mrs Audrey


Peart, Rt Hon Fred
Stoddart, David
Woodall, Alec


Perry, Ernest
Stott, Roger
Woof, Robert


Phipps, Dr Colin
Strang, Gavin
Wrigglesworth, Ian


Prentice, Rt Hon Reg
Strauss, Rt Hn G. R.
Young, David (Bolton E)


Price, William (Rugby)
Summerskill, Hon Dr Shirley



Radice, Giles
Taylor, Mrs Ann (Bolton W)
TELLERS FOR THE AYES:


Rees, Rt Hon Merlyn (Leeds S)
Thomas, Jeffrey (Abertillery)
Mr. Donald Coleman and


Richardson, Miss Jo
Thomas, Mike (Newcastle E)
Mr. Tom Pendry.


Roberts, Albert (Normanton)
Thomas, Ron (Bristol NW)





NOES


Adley, Robert 
Cooke, Robert (Bristol W)
Goodhart, Philip


Aitken, Jonathan 
Cope, John
Goodhew, Victor


Alison, Michael 
Cormack, Patrick
Goodlad, Alastair


Amery, Rt Hon Julian
Corrie, John
Gorst, John


Arnold, Tom
Costain, A. P.
Gower, Sir Raymond (Barry)


Atkins, Rt Hon H. (Spelthorne) 
Crouch, David
Grant, Anthony (Harrow C)


Awdry, Daniel
Crowder, F. P.
Gray, Hamish


Bain, Mrs Margaret
Davies, Rt Hon J. (Knutsford)
Griffiths, Eldon


Baker, Kenneth
Dean, Paul (N Somerset)
Grimond, Rt Hon J.


Banks, Robert 
Dodsworth, Geoffrey
Grist, Ian


Beith, A. J.
Douglas-Hamilton, Lord James
Grylls, Michael


Bell, Ronald
Drayson, Burnaby
Hall, Sir John


Bennett, Dr Reginald (Fareharn)
du Cann, Rt Hon Edward
Hall-Davis, A. G. F.


Benyon, W.
Dunlop, John
Hamilton, Michael (Salisbury)


Berry, Hon Anthony
Durant, Tony
Hampson, Dr Keith


Biffen, John
Dykes, Hugh
Harvie Anderson, Rt Hon Miss


Biggs-Davison, John
Eden, Rt Hon Sir John
Hastings, Stephen


Blaker, Peter
Edwards, Nicholas (Pembroke)
Havers, Sir Michael


Body, Richard
Elliott, Sir William
Hawkins, Paul


Boscawen, Hon Robert
Emery, Peter
Hayhoe, Barney


Bottomley, Peter
Evans, Gwynfor (Carmarthen)
Heath, Rt Hon Edward


Bowden, A. (Brighton, Kemptown)
Ewing, Mrs Winifred (Moray)
Heseltine, Michael


Boyson, Dr Rhodes (Brent)
Eyre, Reginald
Hicks, Robert


Bradford, Rev Robert
Fairbairn, Nicholas
Higgins, Terence L.


Braine, Sir Bernard
Fairgrieve, Russell
Holland, Philip


Britten, Leon
Farr, John
Hooson, Emlyn


Brocklebank-Fowler, C.
Fell, Anthony
Hordern, Peter


Brotherton, Michael
Finsberg, Geoffrey
Howe, Rt Hon Sir Geoffrey


Brown, Sir Edward (Bath)
Fisher, Sir Nigel
Howell, David (Guildford)


Bryan, Sir Paul
Fletcher-Cooke, Charles
Howells, Geraint (Cardigan)


Buchanan-Smith. Alick
Fookes, Miss Janet
Hunt, David (Wirral)


Budgen, Nick
Forman, Nigel
Hunt, John


Bulmer, Esmond
Fowler, Norman (Sutton C'f'd)
Hurd, Douglas


Burden, F. A.
Fox, Marcus
Hutchison, Michael Clark


Butler, Adam (Bosworth)
Fraser, Rt Hon H. (Stafford amp; St)
Irving, Charles (Cheltenham)


Carlisle, Mark
Freud, Clement
Jenkin, Rt Hon P.(Wanst'd amp; W'df'd)


Carson, John
Fry, Peter
Jessel, Toby


Chalker, Mrs Lynda
Galbraith, Hon. T. G. D.
Johnson Smith, G. (E Grinstead)


Churchill, W. S.
Gardiner, George (Reigate)
Johnston, Russell (Inverness)


Clark, Alan (Plymouth, Sutton)
Gardner, Edward (S Fylde)
Jones, Arthur (Daventry)


Clark, William (Croydon S)
Gilmour, Rt Hon Ian (Chesham)
Jopling, Michael


Clarke, Kenneth (Rushcliffe)
Gilmour, Sir John (East Fife)
Joseph, Rt Hon Sir Keith


Clegg, Walter
Glyn, Dr Alan
Kershaw, Anthony


Cockcroft, John
Godber, Rt Hon Joseph
Kimball, Marcus







King, Evelyn (South Dorset)
Morrison, Hon Peter (Chester)
Spicer, Jim (W Dorset)


King, Tom (Bridgwater)
Mudd, David
Spicer, Michael (S Worcester)


Kitson, Sir Timothy
Neave, Airey
Sproat, lain


Knight, Mrs Jill
Nelson, Anthony
Stainton, Keith


Knox, David
Newton, Tony
Stanbrook, Ivor


Lamont, Norman
Nott, John
Stanley, John


Lane, David
Onslow, Cranley
Steel, David(Roxburgh)


Langford-Holt, Sir John
Oppenheim, Mrs Sally
Steen, Anthony(Wavertree)


Latham, Michael (Melton)
Page, John (Harrow West)
Stewart, Donald (Western Isles)


Lawrence, Ivan
Page, Rt Hon R. Graham (Crosby)
Stewart, Ian (Hitchin)


Lawrence, Ivan
Page, Rt Hon R. Graham (Crosby)
Stewart, Ian (Hitchin)


Lawson, Nigel
Pardoe, John
stokes, John


Lester, Jim (Beeston)
Pattie, Geoffrey
stonenouse, Rt Hon John


Lewis, Kenneth (Rutland)
Penhaligon, David
Stradling Thomas, J.


Lloyd, Ian
Percival, Ian
Tapsell, Peter


Loveridge, John
Peyton, Rt Hon John
Taylor, R. (Croydon NW)


Luce, Richard
Pink, R. Bonner
Taylor, Teddy (Cathcart)


McAdden, Sir Stephen
Price, Rt Hon J. Enoch
Tebbit, Norman


McAdden, sir Stephen
Powell, Rt Hon J. Enoch
Tebbit, Norman


MacCormick, lain
Price, David (Eastleigh)
Temple-Morris, Peter


McCrindle, Robert
Prior, Rt Hon James
Thatcher, Rt Hon Margaret


McCusker, H.
Raison, Timothy
Thomas, Rt Hon P. (Hendon S)


Macfarlane, Neil
Rathbone, Tim
Thompson, George


MacGregor, John
Rawlinson, Rt Hon Sir Peter
Townsend, Cyril D.


Macmillan, Rt Hon M. (Farnham)
Rees, Peter (Dover amp; Deal)
Trotter, Neville


McNair-Wilson, M. (Newbury)
Reid, George
Tugendhat, Christopher


McNair-Wilson, P. (New Forest)
Renton, Rt Hon Sir D. (Hunts)
van Straubenzee, W. R.

 
Madel, David
Renton, Tim (Mid-Sussex)
Vaughan, Dr Gerard


Marshall, Michael (Arundel)
Ridley, Hon Nicholas
Wakeham, John


Marten, Neil
Ridsdale, Julian
Walder, David (Clitheroe)


Mates, Michael
Rifkind, Malcolm
Walker, Rt Hon P.(Worcestor)


Mather, Carol
Rippon, Rt Hon Geoffrey
Walker-Smith, Rt Hon Sir Derek


Maude, Angus
Roberts, Michael (Cardiff NW)
Wall, Patrick


Maudling, Rt Hon Reginald
Roberts, Wyn (Conway)
Walters, Dennis


Mawby, Ray
Rodgers, Sir John (Sevenoaks)
Watt, Hamish


Maxwell-Hyslop, Robin
Ross, William (Londonderry)
Weatherill, Bernard


Mayhew, Patrick
Rossi, Hugh (Hornsey)
Wells, John


Meyer, Sir Anthony
Rost, Peter (SE Derbyshire)
Welsh, Andrew


Miller, Hal (Bromsgrove)
Royle, Sir Anthony
Whitelaw, Rt Hon William


Mills, Peter
Sainsbury, Tim
Wiggin, Jerry


Miscampbell, Norman
St. John-Stevas, Norman
Wigley, Dafydd


Mitchell, David (Basingstoke)
Scott, Nicholas
Wilson, Gordon (Dundee E)


Moate, Rogger
Shelton, William (Streatham)
Winterton, Nicholas


Molyneaux, James
Shepherd, Colin
Wood, Rt Hon Richard


Monro, Hector
Shersby, Michael
Young, Sir G. (Ealing, Acton)


Montgomery, Fergus
Silvester, Fred
Younger, Hon George


Moore, John (Croydon C)
Sims, Roger



More, Jasper (Ludlow)
Sinclair, Sir George,
TELLERS FOR THE NOES:


Morgan, Geraint
Skeet, T.H.H.
Mr. Spencer Le Marchant and


Morris, Michael (Northampton S)
Smith, Dudley (Warwick)
Mr. Cecil Parkinson.


Morrison, Charles (Devizes)
Speed, Keith

Question accordingly agreed to.

Main Question, as amended, put and agreed to.

Resolved,
That this House believes that it is in the best interests of British Industry and the

Nation that the Government should continue to develop its industrial strategy in accordance with the principles and objectives of the Industry Act; and welcomes the constructive contribution already made to this work by the National Enterprise Board and the discussions on the Industrial Strategy at the NEDC.

BUSINESS OF THE HOUSE

Ordered,
That the Motion in the name of the Prime Minister for the Adjournment of the House may be proceeded with at this day's Sitting, though opposed, until One o'clock or for three hours after it has been entered upon, whichever is the later.—[Mr. Stoddart.]

EEC DOCUMENTS (PROCEDURE)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Stoddart.]

10.15 p.m.

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): A few weeks ago, we had one of the series of debates on EEC matters and, following the difficulties which arose in that debate, the Government promised that time would be provided for a debate on the procedural aspects of these questions. It is to that debate that we now turn.
We also had a request from hon. Members in many parts of the House that we should provide more time for this debate. We have, therefore, extended the period of the debate. I hope that that will be helpful to the House.
I intend to speak very briefly at the beginning of the proceedings, to listen to the remarks made by other hon. Members, and then to offer some comments at the end of the debate.
First, let me recall the circumstances in which this debate was arranged. We are concerned with two Community documents, one relating to a protein deposit scheme designed to promote the incorporation of skimmed milk powder in animal feed and the other a scheme to aid the private storage of protein feeding stuffs. An earlier version of the proposal for disposing of surplus skimmed milk powder stocks had already been debated as part of the price package.
The documents with which we are concerned came forward at a very late stage, and the Scrutiny Committee was asked to clear them urgently since they were part of the price package on which

the Council was likely to reach early decisions. The Scrutiny Committee produced a Special Report at very short notice and with admirable speed. Certainly nothing that I have said was intended in any way as a criticism of the Scrutiny Committee and of the way in which it discharged its duties in that or in any other respect. I believe that the whole House should be grateful to the Scrutiny Committee for the speed of its conduct on that and on other occasions. Although we have not discovered the answers to many of the problems which arise in this procedure, I am sure that the difficulties have arisen in no sense from the conduct of the Scrutiny Committee. Indeed, the very opposite is the case.
The Scrutiny Committee recommended, in this instance, further consideration by the House but said that that need not delay the adoption of the measure if this proved necessary in the course of negotiations for a satisfactory settlement of the CAP price package. As my right hon. Friend the Minister of Agriculture said in the debate on 12th April, this was a helpful recommendation for which he was grateful. In the event, he had found it necessary to accept the measures as part of the price package. But he acquiesced in a resolution expressing this House's disapproval of them.
Questions were then raised, first, about the effect of the resolution on the measures themselves and, secondly, about the implications for procedure. As for the measures themselves, I made it clear that the first measure, on skimmed milk powder, which had already been adopted remained in legal effect, and that the second, on storage aid, had not been adopted and was being reconsidered by the Commission.
Our concern tonight is not with the substance of these measures. Our purpose is to discuss the procedure adopted and to see what conclusions we can draw for the future.
I would like to reserve my comments until I have heard the views of other hon. Members on these general questions. We had a debate on Monday in which some other matters arose and the Minister of Agriculture made a statement on these, too. We have also had a report from the Select Committee on this subject


making recommendations as to how the House should proceed in the future in dealing with these problems. I do not say that they have discovered a complete solution to our problems, but they have made suggestions about the way in which we can proceed better. I am not saying that I shall make a statement about the Government's views tonight, but shall be glad to hear any views put from any part of the House on the subject.
We still have an important problem to solve in the interests of the agricultural questions raised, and also in the interests of the House of Commons and its authority. I do not believe that we have found a solution, but perhaps the debate will contribute to solving our problems. I shall make further comments at the end of the debate.

10.22 p.m.

Mr. John Peyton: The whole House will be grateful to the right hon. Gentleman for arranging this debate. We have a difficult problem to clear up tonight and we all look forward to his second appearance when he will shed a little more light on the particular circumstances in which we find ourselves. We are confronted with this awful pile of skimmed milk and we have to do something about it.
The Leader of the House said he thought that we would have to come back to this matter for a more general debate and seek a solution about the way in which we accommodate European business in the parliamentary programme in an orderly fashion.
I thank the right hon. Gentleman for what he said about the Scrutiny Committee, because my right hon. Friend the Member for Knutsford (Mr. John Davies) and his colleagues have earned a great debt of gratitude from the whole House for the way in which they have handled this problem in a stopgap fashion and have covered up the total inadequacy of our arrangements here.
One of my difficulties tonight in making this speech is that I find it absolutely impossible to dislike the Minister of Agriculture in any way. On the other hand, I find it impossible to congratulate him on his performance in this matter, so I am in great difficulty from the start. The right hon. Gentleman this afternoon

described himself, or said that he had been described, as "half-kiwi". Until now I had no idea that half of any bird could belong to a migratory species. He has migrated tonight, whether it is because discretion has formed the better part of valour, or he cannot bear to face up to three hours of solemn discussion of his record, I do not know. But we are sincerely sorry that the Minister is not here. It is very sad.
There is no need to go into this problem at length as the House is more or less familiar with it. We all sympathise with the Commission, which finds itself landed with a mountain of skimmed milk powder—something which most people could do without. The Commission came up with the suggestion that in all Member countries, feeding stuffs should contain compulsorily 2 per cent. of this material. One feels very sorry for the consumer—in this case the ultimate animal which has this horrible stuff forced down its throat.
Although it was admitted by everyone concerned that we had no part in creating this surplus, if we were to comply with the requirement to get rid of it we had to buy some from the Continent of Europe. That was a slightly unpalatable duty.
On 13th January this matter came before the Scrutiny Committee. I do not want to weary the House with all the details, but one of the things that were clear was that the Minister did not like it, nor did the Committee. I do not think there was any misunderstanding between them on that occasion. My hon. Friend the Member for Devon, West (Mr. Mills) said:
I was coming to that, that was my preamble!
That was a modest preamble. He asked:
What are you going to do about it?
The Minister replied:
As I have said, that is why I have laid emphasis on a voluntary scheme. I agree with you entirely. Why should we be penalised because this has happened, not through our making, but through what we have seen, the growth of surpluses? So we are anxious to explore a voluntary scheme.
I was not present in that Committee so I cannot say whether the whole Committee burst into applause at that moment. Nevertheless, a substantial degree of harmony was established between


the Committee and the Minister. I am pleased to see the Minister for Agriculture here now, because I am always prepared to return compliments to the right hon. Gentleman. I was explaining to the House how sorry we were not to see him, because I was labouring under some difficulties.
The first difficulty is that I like him so much that I find it difficult ever to be unpleasant about him, and yet on this occasion I find it equally impossible to congratulate him, and therefore I am in considerable difficulty. I was recalling the fact that this afternoon he described himself as "half-kiwi", and not until this moment did I appreciate that fractions of birds could join a migratory species. [HON. MEMBERS: "Repetition."] I was only attempting to extend to the right hon. Gentleman the courtesy that I know he would have extended to me had I missed part of his speech.
On 12th February the matter was debated in the House of Commons, and the Minister made it clear that he thought that an element of compulsion was an important and controversial feature. He said:
An important and controversial feature is its plan for the incorporation of skimmed milk powder in animal feed for a limited period.
That put him on common ground with the House.
The right hon. Gentleman had said earlier:
We have some reservations whether the Commission has always satisfactorily followed through the logic of its own analysis. Moreover, we need to examine closely whether many proposals would be cost-effective and practical."—[Official Report, 12th February 1976; Vol. 905, cc. 707–10.]
The meaning of those last remarks was not exactly clear. Nevertheless, the Minister was recognising that there was approaching an awkward and difficult problem.
Later in the debate the Secretary of State for Wales said:
Again, I understand the concern of those who oppose compulsory incorporation. Such compulsion is, in principle, undesirable."—[Official Report, 12th February 1976; Vol. 905, c. 784.]
It was clear that that idea was firmly in the mind of the right hon. Gentleman when he went to Brussels. He has made much of the point that the Scrutiny Com-

mittee, helpful as ever, said on 25th February:
Of course we do not want to stand in the way of the Minister in his negotiations. He must do his best.
In doing so, they were not issuing the Minister with a carte blanche. The Minister has made over-much of this point.
When it was all over, he said:
I explained on that occasion that I personally did not like these particular proposals and that I would have preferred that the need for them should not have arisen.
At no point was the Minister in any doubt about the merit of the proposals or the view held by the House on them. This is an important issue. My hon. Friend the Member for Devon, West said on that occasion:
It is a little unfair of him now not to admit that he gave a firm promise to us."—[Official Report, 12th April 1976; Vol. 909, cc. 1064–1082.]
The Minister did not intervene to withdraw from the position that a firm promise had been given.
A number of important points arise from this situation. First, this was a dud scheme which under no circumstances should have been given the blessing of anybody with commonsense, let alone a British Minister whose own industry had not contributed to the creation of the surplus. There is a censure motion on this subject in the European Parliament which indicates its view on the way in which the Commissioners handled this matter.
I do not think the Minister should go to Brussels under strict orders and be kept at the end of a piece of string or that he should be brought back to indicate whether he has complied to the letter with his instructions. However, it is important that Ministers acquaint themselves of the view of the House, tell hon. Members their view and report back after having attempted a reconciliation between those views in Europe.
The Minister has not stopped talking since he entered the Chamber. If he wishes to intervene, I shall gladly give way. The right hon. Gentleman is not doing himself any credit. He has something for which to apologise.

Mr. James Johnson: The remarks of the right


hon. Member for Yeovil (Mr. Peyton) are, if not dishonest, at least uncalled for. I am the culprit. I was speaking. It is not only harsh but also indecent of the right hon. Gentleman to accuse my right hon. Friend. I take all the blame.

Mr. Peyton: The hon. Member for Kingston upon Hull, West (Mr. Johnson) is welcome to any blame he likes to take. I was merely mentioning, in passing, the performance of the Minister.

Mr. Tom Litterick: The right hon. Gentleman should get on with it.

Mr. Peyton: There is plenty of time. I have no intention of accepting instructions from the hon. Member for Birmingham, Selly Oak (Mr. Litterick).
Knowing how the House felt on this matter and that he was faced with a thoroughly unsatisfactory and dud scheme, the Minister did not go to Brussels and there say that it was totally unacceptable. That is our charge against him.

Mr. Neil Marten: I understood my right hon. Friend to say that the Minister should listen to the views of the House of Commons. I think that this matter needs clearing up. When we have a one-and-a-half-hour debate we have speeches by waves of pro-Marketeers and anti-Marketeers. Does my right hon. Friend mean only speeches made in the House of Commons or, as my hon. Friend the Member for Saffron Walden (Sir P. Kirk) said in evidence to the Committee, that not only speeches made in the House but the gossip round the corridors and in the Smoking Room should be taken into account?

Mr. Peyton: Far be it from me to tell any Minister, let alone the right hon. Gentleman, what sources of information he should rely upon. On this occasion I am content to say that he had available to him a great deal of knowledge from both the Scrutiny Committee and the House of Commons. I do not doubt that my hon. Friend the Member for Banbury (Mr. Marten), who pays some attention to these matters, will be good enough to give the right hon. Gentleman the benefit of his advice on this occasion. The point is that the Minister, knowing the views of the House and disliking the

scheme himself, failed in his duty to make sure that it was not adopted.
Secondly, what is the Government's attitude towards the legality of the scheme? Did they at any time satisfy themselves that the Commission's proposal was within the powers conferred by the treaty? Did they question whether any misuse of those powers was involved in putting forward this extraordinary proposal? For example, how does the proposal stand up against the yardsticks of either competition or natural justice? If the Secretary of State for the Environment has anything interesting to say, it will be exceptional, but I hope that he will get up and say it. Are the Government satisfied that this proposal was on all fours with the requirements of the treaty regarding competition? Do they agree that this proposal was considered by lawyers in Brussels as recently as 18th May? Are they aware of the outcome of the discussion?
Lastly, where do we go from here? For a long time now the Government have failed to produce any proposals on how European business should be accommodated in the programme of the House of Commons. The Leader of the House, whenever he is challenged on the point, always washes his hands of it by saying "I did not want to go into Europe in the first place. We would not have been there if I had had my way".
That is not the point now. The right hon. Gentleman is the Leader of the House of Commons and it is his duty, on behalf of the Government, to put forward sensible proposals for accommodating this considerable volume of European business. I hope that we shall hear from him, if not detailed proposals, at least how soon he will be in a position to bring proposals before the House.
I have no desire to prolong my remarks in what is inevitably a short debate. But it is right that we should have this discussion. I am glad that the Minister of Agriculture, Fisheries and Food is present, because he may learn at first hand that on this occasion at least not even the most ardent of his admirers can be in wholehearted admiration of his conduct.

10.40 p.m.

Mr. Douglas Jay: The right hon. Member for Yeovil (Mr. Peyton) has made a characteristically


diverting speech, but I am not sure that he was not rather in danger of diverting us from the full seriousness of the situation that we face. I should have thought that there must be very few hon. Members who are not profoundly dissatisfied with the present lack of parliamentary control over EEC legislation. The skimmed milk fiasco, to which the right hon. Gentleman devoted most of his speech, and in addition the debate on Monday on New Zealand butter, show to my mind that neither the recommendations of the Foster Committee on EEC legislation nor, indeed, even the Government's referendum manifesto are at present being honoured.
It is worth recalling that the Foster Committee, in its Second Report, of October 1973, said that it was "inconceivable"—I quote the Committee's word—that any Government would act contrary to a resolution of the House
forbidding the Government to agree to a proposed change in the law".
The Government's referendum manifesto, which they delivered to every household in the land, said this, as hon. Members will remember:
The Minister representing Britain can veto any proposals for a new law or a new tax if he considers it to be against British interests.
Unquestionably, in the case of skimmed milk an New Zealand butter, the Minister of Agriculture failed to carry out those undertakings.
Let us not forget that the House actually passed a resolution disapproving the skimmed milk proposal. It was not merely a matter of views expressed in the Smoking Room or the Corridors. It was an actual vote in the House.
It is ironical that while the British Parliament, in these cases, has been virtually ignored by Ministers, Denmark —to take one instance—has established a far more effective control over this legislation. A recent article in The Times on the Danish system said this:
The Folketing has set up a special standing committee whose approval must be obtained before a Danish Minister can cast his vote on any topic in the Council of Ministers.
That is what they have succeeded in doing in Denmark.
If we are to repair the damage that has already been caused by the skimmed milk and the New Zealand butter muddles

and re-establish some sort of real preliminary control over this legislation, three difficulties must be overcome. First, we must ensure that parliamentary debates on EEC legislation are held in good time, well before the crucial discussions in Brussels. The Scrutiny Committee, in its First Special Report, which appeared last week, makes a number of suggestions to this end which I wholeheartedly support. Essentially, it demands—I quote one sentence from the report—that
The Government should take steps to ensure that debates are brought on as soon as possible after the Committee have recommended instruments for further consideration.
Secondly—because that is not enough —we must also ensure that the Minister does not, despite that, go to Brussels and accept some legislative proposal before the debate here has taken place. That is the situation with which we have been threatened in these last few weeks.
The Government's undertaking—we have had an undertaking that this would not happen—not to jump the gun in this way was first given by my right hon. Friend the Minister of State for Foreign and Commonwealth Affairs as long ago as 11th June 1974, in a reply to a question of mine in an intervention in a speech in the House on that day. I asked for an assurance that the Government would not allow an EEC instrument to proceed in the EEC machinery if the Scrutiny Committee had notified the Government that it thought that it should be examined by the House. That was the exact question asked. The Minister of State replied "Certainly" to that question and he added later:
Concerning the legislation, however, I give my right hon. Friend that assurance, willingly and without qualification.—[Official Report, 11th June 1974, Vol. 874, c. 1547.]
That is what the Minister of State said on that occasion, and that assurance was repeated in paragraph 138 of the Government's White Paper "Report on Renegotiation" of March 1975. It said the Government
have further undertaken to ensure, consistently with the national interest, that final decisions are not taken in the Council of Ministers on proposals recommended for debate in Parliament until the debate has taken place.
Those are the Government's words in their own White Paper.
But it is all too apparent that these undertakings are not being fully carried


out. To my mind it is entirely unsatisfactory in many cases that a constitutional principle of this importance should rest simply on the verbal assurance of a Minister in answer to an intervention in his speech. It ought to be enshrined at least in a resolution of this House, if not in a Standing Order.
I would like to clear up one point of confusion. It is sometimes said—I think my right hon. Friend the Minister of Agriculture said it tday—that one must not tie Ministers too closely because they are negotiating and they must not be too rigidly pinned down in advance. However, we are not here concerned with negotiation; we are concerned with legislation. It is the confusion between the two in the EEC system which causes all the trouble.
This skimmed milk regulation is not just something negotiated by a Minister. It is now the law, enforceable in the British courts. We do not allow the Chancellor of the Exchequer to come to this House and say that the Cabinet has decided to raise income tax but, unfortunately, he did not have time to get the approval of the House because there was no time for a wearisome debate. One would not allow that in the case of legislation on taxation. Therefore, where legislation is concerned, there should be no special cases where a Minister can just waive the Parliamentary procedure.
I would suggest that instead of a verbal undertaking, the House should adopt, as soon as possible, some resolution which would enshrine, in proper parliamentary form, the undertaking which the Government are supposed to have given. Naturally, I am not moving it tonight, but I would suggest that such a resolution could read:
That where the Select Committee on European Secondary legislation has recommended that any draft legislation or other proposal. published by the Commission of the EEC and submitted to the Council of Ministers should be further considered by the House; no Minister of the Crown shall give agreement to such a proposal in the Council of Ministers until such time as this House has come to a decision on a motion relating to that proposal.
I invite my right hon. Friend, the Leader of the House, to assure us tonight, if he can, that he is willing to accept such a resolution or, better still, that he himself will propose a resolution

to the House on these lines. That in itself would be a great advance.
A third problem is to ensure that when the House has given its decision, Ministers do not act contrary to that decision in Brussels. It seems necessary to remind some Ministers that they are just as responsible to the House for what they do in Brussels as for what they do in Whitehall, Birmingham, Manchester or even Workington—a fine constituency which I know almost as well as does my right hon. Friend the Minister of Agriculture. I hope that he accepts the principle.
The Foster Committee said that it was inconceivable that Ministers would defy a resolution of the House. The Select Committee on Procedure in its report on EEC legislation of March 1975 said:
Your Committee assume … that in any foreseeable circumstances, a Resolution requiring the Minister concerned to take certain action in the Council of Ministers would be complied with.
After the skimmed milk affair we evidently need some much firmer safeguard to see that this is carried out. At the very least we should have an explicit ministerial assurance that in future Ministers will not disregard resolutions carried in the House, and, perhaps, a resolution of the House, to that effect, to ensure that nothing like the skimmed milk affair happens again. Failing that, I remind hon. Members that the House has full legal and constitutional power if it wishes to amend the European Communities Act, and that might turn out to be the only satisfactory solution to this problem.

The Minister of Agriculture, Fisheries and Food (Mr. Fred Peart): I respect my right hon. Friend's views, but the Scrutiny Committee discussed skimmed milk and laid down that I should not frustrate a package if I thought it basically necessary. That is there in writing. I am not complaining. I attended the Scrutiny Committee, and that was its report.

Mr. John Davies: It is necessary to consider the wording of the Scrutiny Committee's conclusion, which is as follows:
While therefore the Committee report that in their opinion the two instruments raise questions of political importance and recommend


that they be further considered by the House, they do not consider that such further consideration need delay their adoption by the Council should such adoption prove necessary in the course of negotiations to achieve a satisfactory settlement on the package as a whole.
The difficulty is that the settlement could hardly be called satisfactory if the House disapproved it and the Minister accepted that disapproval.

Mr. Peart: The package I got from Brussels was a very good package for the farming community.

Mr. Jay: I am well aware of what the Scrutiny Committee said, but that is not the point I am making. The House passed a resolution disapproving the Skimmed Milk Regulation and, in addition, my right hon. Friend, the Minister of Agriculture on a previous occasion said that he accepted the Opposition motion disapproving that Regulation before he went to Brussels. He therefore acted contrary to the clear decision and wish of the House.
To prevent anything similar happening in future the old solution may be an amendment of the European Communities Act laying down that no EEC legislative instrument shall have the force of law in this country unless it has been approved by the British Parliament. I do not ask my right hon. Friend the Leader of the House to go as far as that tonight, but, if we are to maintain some parliamentary control over legislation, he may find that he will have to do so before long. Meanwhile, I emphatically ask the Government to accept a resolution such as that which I mentioned earlier.

10.55 p.m.

Mr. John Davies: The right hon. Member for Battersea, North (Mr. Jay) has drawn our attention to one of the recommendations made in the First Special Report of the Scrutiny Committee regarding the timely discussion of Community issues in the House. The Scrutiny Committee felt strongly that the system was defective and that many issues were not considered early enough.
That flows from the problem posed by the legislative method of the Community. I do not dispute that method. I have accepted it. I have been in favour of the Community form of action and I do not

withdraw from that. But is poses considerable problems for the House with its totally different methods of handing legislation. We had, therefore, to devise a method by which the House could intervene in the legislative process of the Community—an intervention which was not included in the habitual methods of the House but which could be effective. Such a method should enable the House to express its view to enable Ministers to enter discussions in no doubt about the feelings of hon. Members.
That is the object of the Scrutiny Committee and of devising a method of dealing with special legislation. But the machinery is not entirely effective because it has been used either too late or at a stage when the Minister is incapable of changing the course of events to which he has already, wittingly or unwittingly, lent his hand.
Let us consider the procedures outside the House as they affect our business. The Community has accepted legislation through the Council of Ministers on the basis of proposals made by the Commission. Proposals by the Commission are taken up by the Council of Ministers, which forms the law based on those proposals. The system of the House has been to get its word in edgeways at the proposal stage. But that presupposes that there is a sufficient interval to enable the problem to be considered. It presupposes that what the Council of Ministers' ultimately decides is the same as that which the Commission originally proposed. If there is a mapor change during the course of the Council of Ministers' activities which fundamentally changes the nature of the proposal, the House and the Scrutiny Committee are in no position to exercise pressure on the Minister.
The defect is in the procedures adopted, particularly by the Council of Agriculture Ministers, more than in the method adopted by the House. The agriculture Ministers sit around arguing and negotiating propositions made by the Commission and sometimes they fundamentally change the proposition.
The right hon. Gentleman the Minister of Agriculture, Fisheries and Food, told us today that a proposal made on New Zealand butter was fundamentally changed by the Council. What we must be assured of, if this is to be an effective


method of trying to impress Ministers with the views of the House, is that that shall not happen, and that before matters go to the Council of Ministers in final and definitive form there is an opportunity for them to be considered here.
I know that the Minister finds that a very awkward straitjacket in which to be. I sympathise with him. The last thing I want to do is to make his negotiating position more difficult. The universal adoption within the Community of the Danish system of scrutiny would totally immobilise him. It is highly undesirable for the House, which lent itself to the purpose of Community membership, to try to establish a permanent obstacle to the conduct of the work. That is not necessary. But it is desirable that the House and the country should be reassured that in relation to those major changes in their lives brought about by Community measures there is some means of expression, and not simply a fiction.
The danger the Minister must face is that it has become more and more undesirable for the House to be in a position where it is just being used to take off a safety catch to allow him to do what he wants. If the House is to get into that frame of mind, the relationships between it and the Minister on these important matters will deteriorate.
Therefore, I strongly urge the Leader of the House in his arrangement of the business of the House and, even more, the Government in their handling of affairs in the Community to seek to ensure that there is no creation of a highly undesirable situation whereby fundamental problems arise without any knowledge being available to the Scrutiny Committee or the House, and, most of all, no opportunity to ventilate views.
Unless that problem can be overcome, it is inevitable that the attitude of the House will become more and more aggravated and, not least, that the position of the Council of Ministers will become unsatisfactory. We have seen in this skimmed milk case that the Council, no doubt in the course of a heavy-headed 3 o'clock in the morning discussion, found a Marvellous method of getting rid of skimmed milk down the mouths of unsuspecting animals. But the proof of the pudding was not in the eating by

the animals. They have not found it digestible, nor have the humans who had to deal with the problem subsequently. The solution had to be rehashed, and even the rehashing has met resistance from the European Parliament, which, acting within its full rights, pointed out the inadmissibility of a system of compensating other protein imports which was wholly unsatisfactory.
Our experience with the skimmed milk is no doubt important in itself, but more importantly, it illustrates what is not just a defective procedure here but a defective procedure in the conduct of the Council of Agriculture Ministers and the Council of Ministers generally in Brussels. I hope that the Government will put every effort into trying to have that major defect put right.

11.4 p.m.

Mr. Bryan Gould: Everyone agrees that the skimmed milk regulation is a nonsense. It is arbitrary, in that it compels British farmers, consumers and taxpayers to act contrary to their interests. It does so irrationally and for no apparent benefit, at least to anybody in this country.
The regulation is unfair nonsense, because it compels British farmers, particularly, to bear a burden, accept a responsibility, even to pay a penalty, for a problem in the formation of which they had no part. It is also an expensive nonsense. The scheme will cost the Community budget 170 million units of account—about £100 million. The British taxpayers' share will be about £16 million, to say nothing of the cost to the individual farmer in this country of having to buy uneconomic foodstuffs which his poultry will not eat.
It is not the substance of this regulation that we are debating. Our question is "How do we protect the British consumer, the British taxpayer and the British farmer against such a nonsense?" I say "How do we protect those people?" because responsibility in the end is ours. It is perfectly clear that the Minister cannot protect these people. I say that with no intention of criticising him personally but, as so many of us forecast before we finally confirmed our membership, the much-vaunted veto cannot be exercised in these circumstances.
The Minister finds himself faced with a package deal. He must yield on some


points to get others. It is futile, therefore, to look to the Minister to try to protect our interests in this way. Therefore, responsibility is ours. What happened when we tried to exercise it? The Minister came back from Brussels and told the House that he did not like the regulation. That was no surprise, because we had told him that in advance and he confirmed it. The House unanimously condemned it, with the support of the Opposition, the Government and the Minister himself, but it remained law.
The question therefore is: can we accept a situation where that sort of decision made by Ministers in Brussels can be directly applicable as law in this country in spite of the express decision, will, and desire of the House of Commons? That is the question.
The question is not so much that the executive is making law, because in a sense that is happening here already, although always within the framework of powers conferred by the House of Commons. I hope that we shall hear nothing of the argument sometimes advanced that our powers over the executive are already weak and that we should not mind their further diminution. That is like saying to a man with a wooden leg that because he finds walking difficult he should get the other leg amputated.
We have to try to extend control over the executive. This is a case not simply the executive making law-making decisions. We are concerned here with a member of the executive making lawmaking decisions for which he denies responsibility, because he has done it not on his own account, but in concert with eight others, because he is one among nine and when they reach a decision against his better judgment he is able to come back and say, "I disclaim responsibility. I could do nothing about it. It is not my decision. This decision was taken by an external body. I had to agree."
If the House accepts that, it is accepting not only a substantial and serious diminution of our democratic control over laws made in this way but a fundamental revision and indeed a negation of a basic principle of our constitution—ministerial responsibility to this House. I do not agree that this is simply a case

where something went wrong with the procedure, that some little mistake was made, that we can cure it next time and that it will be all right.
It was disingenuous of the right hon. Member for Yeovil (Mr. Peyton) to suggest that in some way the Minister was mistaken or could be criticised for what he said, because he acted within the system for which the Conservative Party voted. It is wrong for them to criticise the Minister for acting thus.

Mr. Frank Hooley: Is my hon. Friend not drifting on to slightly dangerous ground? He is surely not saying that the Minister must accept any negotiated package? Surely if they did something which was manifestly nonsense and against the interests of this country, the Minister has a residual right to veto.

Mr. Gould: If it were an issue of crucial national importance, such as national security or North Sea oil, we should, of course, expect the Minister to veto such a proposal. But we have always forecast that the erosion of our powers would come on issues of middling importance, not on those of major importance, that the loss of power would be gradual, step by step, on small issues, and that if we failed to react and to demand further powers to control what Ministers were doing on such issues, our powers would slip away imperceptibly. That is what is happening, and that is what happened over skimmed milk.
I believe that it is very important, nevertheless, that we should try to tighten up the procedures that we have already established, and I entirely agree that it would be beneficial to all of us if we were to embody, in the form of a resolution of the House, the undertakings which the Government have already given in regard to debating important issues. But I believe that that is not enough. In the end what we shall have to do, if we wish to avoid this problem arising again and again—and what we shall come to in the end—is to make some amendment to the European Communities Act which will give the House, in limited cases, perhaps, a power of review over what is decided in Brussels.
In my view, where the issue had been decided to be important, and where the


Minister had substantially departed from the wishes of the House, in those limited cases it should be possible, under our domestic legislation, for the House to have the power to say "Yes" or "No" to whether that measure should have legislative effect.
I know that it will be argued that if we were to amend the European Communities Act in that way it would imply a derogation from our treaty obligations, and that is undeniable. But that is a practical problem which would arise only in those very infrequent cases where the Minister, in the full knowledge that the power existed, nevertheless went ahead and agreed to something which the House subsequently wished to review.
I cannot, therefore, see that there will be any great problem of principle, since the domestic legal situation will be perfectly clear. It will be established by the amended European Communities Act. The only difficulty which could arise is that, where such a conflict broke out between the House of Commons and what the Minister agreed to in the Council of Ministers, there would then be a problem of international law. What better way to resolve this than by negotiation with our European partners? They negotiate away such problems all the time.
If we think that there is any way in which we can avoid such a problem arising under the European Communities Act as it stands at the moment, we are quite mistaken. Without a doubt the day will come, perhaps shortly, when the House will refuse to give legislative effect to a directive of the Council of Ministers, and precisely the same conflict will then arise.
While I agree with and warmly support the draft resolution read out by my right hon. Friend the Member for Battersea, North (Mr. Jay), and believe that it is an important resolution which the House ought to adopt, nevertheless I believe that if we are to fulfil our responsibilities to the people who elected us and sent us here to protect our interests, and to make a proper contribution to the Community itself by introducing a true element of democratic control over what is there decided, we must in the end come to an amendment of the European Communities Act.

11.13 p.m.

Mr. Geoffrey Rippon: I should like first to express thanks to the Leader of the House for extending the time for the debate tonight, as requested by me on Monday. It is a debate which raises matters of very considerable constitutional importance, and I hope that at the end of the day the Leader of the House will be in no doubt about his responsibilties in the matter, about the responsibilities of the Government, and about the powers that the House already possesses.
The disturbing feature of the decision which was reached on 12th April, on these Community documents on skimmed milk powder and protein storage, was the fact, first of all, that the Government had failed to bring the matter to the House for discussion in good time.

Mr. Peart: This matter was discussed in the House on two occasions. As the Scrutiny Committee knows, I also addressed it and discussed this matter. It is wrong to assume that the House has never discussed it.

Mr. Rippon: Probably it is fair to say that it was discussed during the general discussions on the Agricultural Price Review in a general way. But that is the complaint. The House does not have time to debate these matters and to influence the decisions of the Government.
The second question is by far the most important one, in my view. The real effect of the decision on 12th April was that it showed that the Government had failed to accept their own responsibility for their own actions. The Minister of Agriculture intervened earlier in our proceedings to say that he thought that it was a good package—

Mr. Peart: It was.

Mr. Rippon: Then he should have defended the package—

Mr. Peart: I did.

Mr. Rippon: The business of the Government is to make an agreement and then defend it and to carry the agreement through the House. They cannot as a Government say "We accept a resolution deploring what we have done" and, when the House has accepted that resolution deploring the Government's policy which they have not themselves


defended by a vote, then say "But it does not matter if the House has deplored it because it has now come into effect and this is all a result of the European Communities Act".
In effect, that is what the Leader of the House was saying on 13th April. He said:
… under the provisions of the European Communities Act, decisions may be made in Brussels which cannot be upset by some of the decisions made by the House of Commons. That is precisely the dilemma in which we are placed.—[Official Report, 13th April 1976; Vol. 909, c. 1166.]
But, in my submission, it is a dilemma of the Government's own making, and, what is more, it is not an accurate statement of the constitutional position.
We discussed these matters at considerable length in the course of our debates on the European Communities Bill. It was then suggested by the present Secretary of State for the Environment, the right hon. Member for Stepney and Poplar (Mr. Shore), that, once a regulation had been made in Brussels, we could not interfere with it, we could not amend it, and we could not reject it.
Under our normal constitutional procedure, if the Government enter into a treaty or agreement in exercise of the prerogative power, there is no reason why this House should have a sight of it in advance. But, thereafter, it can accept or reject it as a whole. What it cannot do is accept or reject bits of it.
That is the difficulty into which we get in the debate on skimmed milk powder. It is impossible for us or for any other member of the Community to look at the package, which has been negotiated with a fair balance of mutual advantage for everyone, and say "We do not want the skimmed milk powder bit, but we want the £15 million or £20 million a month subsidy to the British consumer and the agreement on beef prices". It was a good agreement, and the Minister should have defended it. He should not have allowed the House to pass a resolution deploring it.
Once this House passes a resolution deploring the Government's action, very considerable difficulties arise. In the debate on Monday, I quoted what I said on 8th March 1972:
One thing should be made clear. Of course, the House of Commons could debate it. There is no doubt about that. As we

have made clear all along, any Government are responsible to the House of Commons. Therefore, if they entered, or allowed the Community to enter, agreements which could not be carried through this House or which were subject to a vote of censure, they would be open to great difficulty.—[Official Report, 8th March 1972; Vol. 832, c. 1581.]
I do not think that any Government can say "There has not been a vote of censure on us because we accepted the motion". If they could, they could do it not in relation simply to EEC matters but to anything else. But we have censured the Government, in circumstances which are very unusual. It may be that a motion just deploring an action of a Government is not in a suitable form, but if the Government enter into an agreement in Brussels knowing that it will be contrary to the wishes of the House of Commons, we can censure the Minister, we can censure the Government, or we can require the Minister to go back to Brussels and renegotiate.
I remember that, during our debates on the European Communities Bill, many said "As soon as it is passed, we shall be bound for ever". In the same breath, they said "But if we win the next election we shall renegotiate it". They renegotiated it, although they did not change the treaty or change the Act. But there was a so-called renegotiation. Now it would be possible, if the House objected to any agreement, to instruct the Minister to go back and renegotiate.
Of course, in the last resort the House could pass legislation amending or rejecting the whole of a regulation or agreement. But we always said in the debates on the European Communities Act that one could not envisage a situation in which that could arise, because one could not envisage a situation in which a Government went to Brussels, and then acted contrary to the wishes of the House of Commons and contrary to the constitutional doctrine that the Government are responsible for their own actions and should carry their own business through the House of Commons. This is what our European partners expect of a British Government, and that is what we expect of them.
I do not think that this requires any consideration of suggestions that we should amend the European Communities Act. We had many debates about this. We said then that it would


be wrong to write into an Act of Parliament provisions regulating the procedures of the House of Commons, because it would be very difficult to write into legislation provisions relating to procedures when it is desirable that those procedures should be as flexible as possible. As far as regulations which may be made are concerned, I said this on 26 April, 1972:
Parliament is sovereign. lf, contrary to the wishes of the House. the Government were to allow a regulation to be made, they would run the risk that the House would, in effect, order our domestic courts not to give effect to it. That would be a breach of the Treaty obligations. I canot conceive of any circumstances in which that would arise. But that is the position."—[Official Report, 26 April 1972; Vol. 835, c. 1584.]
I believe that is so, and we have said it time and time again.

Mr. Marten: The position here is that the Minister went to Brussels and agreed with something, came back to this House and accepted an Opposition motion which entirely disagreed with what he had agreed to.

Mr. Peart: No.

Mr. Marten: It is right that in these circumstances the Minister should offer his resignation.

Mr. Rippon: I am prepared to accept that eveyone got in a muddle on this occasion. But at no time in the future should the Government enter an agreement, and then refuse to defend it on the Floor of the House of Commons. It is not good enough to accept a motion of censure and then say that, because there was no vote, it does not count. It was a motion of censure, which normally would have required the resignation of the Minister, the resignation of the Government, or a renegotiation of the proposals. It was an abdication of the Government's responsibilities.

Mr. Peart: The right hon. Gentleman is quite right to pursue this point as he sees it. We were dealing with a major package affecting the agricultural industry, including our own agricultural review as well. I believe that the package was good for the farming community. No other Ministers in the Community opposed it, even though we all had our doubts about skimmed milk. Take our

hill farmers, for example; would any hon. Member have stopped the deal and its benefits to hill farmers because of the skimmed milk?

Mr. Rippon: This is the whole point. The Government enter into treaties and agreements believing them to be in the national interest. I accept that this was a good agreement, and that the skimmed milk part could not be separated from the rest of the package. The Government could have opposed the motion, or put down an amendment dealing with the real substance of the matter and asking the House to approve the package as a whole. I, for one, certainly would have voted with the Government on that.
The difficulty is not on the merits of the wretched skimmed milk powder. It is a major constitutional issue as to how the Government should behave in these circumstances, and what the powers of the House are to ensure that no Government should do anything ultimately that the House would not accept. Ultimately Parliament is sovereign. If the Government enter an agreement which the House does not like, it can defeat the Government, or tell them to renegotiate, or, in the last resort—which I could not recommend—pass domestic legislation directly contrary to the international obligations, and that would be enforced in our courts.
We should be reluctant to do that, and I cannot see myself voting for such legislation in relation to skimmed milk powder, but the power is there. Meanwhile, I think we all agree with what was said by my right hon. Friend the Member for Knutsford (Mr. Davies) and by the Scrutiny Committee about the need to improve our procedures to ensure that matters come before us as quickly as possible, and if necessary to provide the Standing Order which the Scrutiny Committee suggests.
I think that we sometimes make an error in approaching these matters in too legalistic a way and, as my right hon. Friend said, tracking these proposals down while they are changing all the time. That is not the responsibility of the Scrutiny Committee. It is the responsibility of the Government and the Leader of the House to see that a statement is made on, for example, New Zealand butter at the proper time so that the House can debate it if it wants to do so.
It is also important that the terms of reference of the Committee should be extended in the way suggested so that it can bring forward matters of major importance. It is absurd that it cannot bring to the House proposals in regard to the Tindemans Report or the accession of Greece to the Community. It is absurd that its terms of reference should be more limited than those of the House of Lords.
I think that within the powers of this House as they now exist, without any need for further legislation, we can so order the procedures as to ensure that we have proper time to consider these matters; that we can so order the procedures as to ensure that we discuss those matters that we want to discuss, and in suitable circumstances. We can deal with the Government, but I hope that we shall have an assurance from the Leader of the House that a situation will never again arise when the Government tamely accept a motion deploring their conduct and then say that the motion is of no effect.

11.27 p.m.

Mr. John Mendelson: The temptation is considerable to follow the right hon. and learned Member for Hexham (Mr. Rippon) into some of the statements that he made during the debate on the European Communities Bill, but as I do not believe that that would take us much further forward in what must be the main purpose of the debate, which is to provide machinery for the future control of European Community business, I intend to resist that temptation. But the right hon. and learned Gentleman must not think that what he said would have remained unchallenged if there had been plenty of time for a debate on the history of the matter.
I find intolerable the anxiety of so many right hon. and hon. Friends on the Conservative Benches to accuse my right hon. Friend the Minister of Agriculture of not having used the veto, when they know very well that when they concluded the negotiations they did not intend that the British Government, from whichever party was in power, should, after we had joined the Community spend all their time every Monday and Friday using the veto.
There was, of course, a reference to the veto in the propaganda that was sent out when the appeal was made to the

people of this country to confirm our remaining a member of the Common Market, but only a political child could have thought that the veto was something that any member of the Nine would use on a normal occasion and that it would be the normal procedure of a member of the Community to use the veto procedure whenever anything turned up. That is obvious nonsense, and it was always clear throughout those long debates that only in the most extreme circumstances would any British Government be justified in even considering the use of the veto. To place the entire responsibility for not having immediately used this extreme method of proceeding upon my right hon. Friend the Minister of Agriculture who happens to be involved tonight because his Department is concerned with this issue is completely unfair and politically misleading.
That is not the centre of this debate. The right hon. Member for Yeovil (Mr. Peyton) made life far too easy for himself, because although he said that he found it difficult to be beastly to my right hon. Friend, by trying to be so kind to him he made it appear that we were dealing with a problem which could easily have been solved if the Minister concerned had adopted a somewhat tougher attitude. That is not the problem. Nor will the problem be solved by the attitude adopted by the right hon. and learned Member for Hexham, who suggests that when there is a situation in which the House of Commons is profoundly opposed to one part of an international agreement but when the Government feel that there are certain other aspects of the agreement that may be useful, and the Government are engaged in protracted negotiations, the House of Commons should be completely and permanently helpless, and should be forced to accept every part of the agreement without being able to do anything about it.
That is the real problem. What was the advice given by the right hon. and learned Member for Hexham? He said "All right; you knew that the House of Commons did not want the skimmed milk agreement; it regarded it both as absurd and immoral. But you wanted the other part of the agreement, so you have to tell the House of Commons 'We demand that you accept the part of the agreement that you do not like, as


well'". That is what the right hon. and learned Gentleman advised.

Mr. Rippon: It is not my advice;it has always been the constitutional position, on entering into an international treaty or agreement, that the House of Commons can accept or reject it; it cannot amend it.

Mr. Mendelson: That is what I suspected. I am glad that the right hon. and learned Gentleman used the term "international treaty or agreement". That is the whole trouble. We are carrying on the tradition of the Foreign Office, which is used to concluding international treaties and agreements and telling the House of Commons as late as possible, keeping everything secret until then. But here we are dealing with the Council of Ministers, which is not a collection of diplomats but is the only legislative body of the Common Market, and the duty of that body is to tell the House of Commons as early as possible, so that the representatives of the people of the United Kingdom have an early opportunity of making their voices heard. There we have the parallel of taxation; otherwise it is taxation without representation, and skimmed milk without being asked about it.
As the right hon. and learned Gentleman said, we have to accept it, although we are not responsible for it. That is what has led to the difficulty tonight. This fundamental difficulty can be cured in a completely different way. The parallel with an international treaty does not hold. The right hon. and learned Gentleman who negotiated on behalf of this country—and who ought to be the first to realise it—is confusing the House by drawing this easy parallel tonight. I am unable to agree with my hon. Friend the Member for Southampton, Test (Mr. Gould), although I agree almost entirely with the tenor of his speech. I cannot agree with him on his proposal about a possible amendment of the treaty. It would take too long. I do not think that we would be able to find a solution quickly enough to deal with the constitutional and procedural problem facing this country. However desirable such an amendment might be, it is not practical politics to think in those terms.
I am much more drawn to the proposal made by my right hon. Friend the Member for Battersea, North (Mr. Jay) —the proposal for a revised text, which I commend to the Leader of the House for his consideration, because the situation is urgent. I happened to have been a member of the Select Committee on Procedure, which, under the previous Administration was asked by the House to take a first look at the problem, at the time when the Scrutiny Committee was also holding its first parallel meeting. The right hon. Member for Knutsword (Mr. Davies) was Chairman of the Scrutiny Committee then, as he is now. We found the problem intractable and very difficult, and we were no wiser than any who have tried since.
The problem was urgent then, and it is even more urgent tonight. The peculiar difficulty that we faced then, and will face now, in trying to produce a solution, is that whether we admit it or not—there are many hon. Members absent tonight who voted for this country's entry into the Common Market who do not bother to take part in debates when these difficulties face us, but who refused to see our case when we put it to them at the time—is that there is a federal element in the organisation of the Common Market. This element is at work all the time and any British Minister who takes part in negotiations must face it.
The right hon. Member for Knutsford has suggested that a change should take place not in this House but in the Council of Ministers. That is unrealistic and I do not believe that it is possible—as the right hon. Gentleman would discover if he were still a Minister—to prescribe to the Council how it should conduct its business.
Ministers have to arrive at a solution after what may have been protracted negotiations involving third countries across the world and various other interests. We cannot prescribe in advance the precise method the Council should use to reach agreement.

Mr. John Davies: The Treaty of Rome lays down the method by which the Council shall arrive at its conclusions. It does so on the basis of proposals made by the Commission. That is the basis of the law-making capability of


the Community. In the course of its deliberations, the Council may vary its views. I was saying that it is perfectly practicable that if a totally new issue is introduced into the proposal under consideration, there should be an opportunity for that new element to receive more mature consideration.
It is impossible to claim that the Treaty of Rome is being respected if a Commission proposal is so fundamentally changed in the course of the Council's deliberations that it ceases to be a real reflection of the original document.

Mr. Mendelson: No one would quarrel with the last part of the right hon. Gentleman's remarks. But, on the first part, he will have heard members of the Council saying that if they are to succeed, they must be free to look at proposals with fresh minds. They must be free to work out a solution as they see fit. That is common sense and should be common ground among us.

Mr. Hooley: Surely my hon. Friend will accept that in the course of negotiations Ministers can say to their colleagues "My Parliament will not take that"—whatever the "that" may be? It is absurd to suggest that in order to get "a", "b", "c" and "d", a Minister has to accept "g" which he knows to be repugnant to his Parliament.

Mr. Mendelson: I shall be coming to that point almost immediately.
If it is common ground that the Council should be allowed this freedom and leeway if it is to do its work efficiently, the change cannot be left to Ministers. They often say that, under the Treaty, the Commission makes proposals. But we cannot limit the Council to what comes from the Commission. Anyone who has heard Signor Ortoli speaking about his experiences will know that a lot happens between the Commission and the Council which is not according to the book. Anyone who knows the real life of politics will not be surprised at that.
I agree with my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) that the views of the House must be respected, but change cannot be brought about by prescribing to the Council a different method of working and burdening the Minister of Agriculture with

everything that has gone wrong. It is only by seeking radical changes on this side of the Channel that we shall bring about an improvement in the procedures.
What would these changes mean? I hope to fill in a little of the proposal made by my right hon. Friend the Member for Battersea, North. We need not be afraid of running foul of opinion in other countries. We all knew that once we entered the Common Market, whether we were for or against it, the British constitution could not continue as it was before. I think that everyone is agreed about that. Therefore, those who advocated our entry should agree that certain amendments to our procedure are urgently required to safeguard as much as possible of the normal representative character of democracy within the United Kingdom. After all, every political party in the land has made a pledge to the electorate that that should be brought about, even if it includes fairly radical changes in our attitude to the Common Market and its procedures.
My hon. Friend the Member for Sheffield, Heeley was right in what he said. It is for this House, not for my right hon. Friend, as a Minister, when he meets the other eight Ministers to lay down certain conditions. First, we must hear early—in contrast to the normal practice of the Foreign Office which informs the House after an agreement has been concluded, but before it has been ratified—what is in the offing.
Secondly, when there is a report, after early notification by the Scrutiny Committee, time must be provided for a debate. Sometimes it will have to be at the cost of time provided for domestic legislation. Common Market legislation will grow in importance, whether we like it or not. Therefore, the Leader of the House and the other business managers will have to consider putting other business in second place. Some of the Common Market business will have to come on at 3.30 in the afternoon and occupy the main part of the day, instead of being conducted at 10 o'clock, midnight, or even later.
Thirdly, when decisions have been taken, there should be a clear mandate to negotiating Ministers not to commit this country against the expressed opinion of this House. I should like to add a caveat. That will not happen every Monday and Friday. We know that on most


subjects the Government do not leave matters to chance. Once the system is established, the Government will obviously see to it that their machinery, majority and interest in this House will come into play. As long as no decisions were to be taken, there was considerable latitude on the part of the Government as to how matters were or were not organised. But once we establish a system where such decisions begin to matter, the Government will start to organise their business. That is part of our system and it must be accepted. Then we shall see whether there is such strong feeling on the Government side and on other sides about a clearly expressed opinion of the House of Commons on subjects which matter. If they said "No", the question of confidence in the Government would arise. But there must be a clear mandate against which no Minister can act. I repeat, that would not happen every Monday and Friday.
On most other matters the normal process of negotiation would proceed. Under such a procedure, absurd decisions, such as that on skimmed milk, which many of us regard as bad policy, immoral and not acceptable to the overwhelming majority of the British people, would not be proceeded with.
That should be the massage to go out from this debate. The Leader of the House would be well advised to report to and persuade his colleagues in the Cabinet that the advice given to him by my right hon. Friend the Member for Battersea, North is sound advice on which the Government should act.

11.45 p.m.

Mr. J. Enoch Powell: It seems that in this debate, as in many of these debates on European Economic Community matters and procedure, there is the danger of a gulf between the form and the reality which we are deliberately ignoring. It seemed to me that in this particular debate it was perhaps only the hon. Member for Southampton, Test (Mr. Gould) who sought to direct the attention of the House to that gulf.
I can perhaps best illustrate what I mean by referring to one of the subjects that we have for debate this evening, and that is the First Special Report of the Scrutiny Committee. On the surface, as

one reads this First Special Report, all is bland. It is the assumption that there is an acceptance on all sides of the general principle that the Government and Ministers will not assent in the Council of Ministers to proposals which have, if recommended by the Scrutiny Committee, not previously been debated by the House of Commons. The report in form is devoting itself to the question how that principle, generally accepted, can be rendered more effective. I think that that is a phrase which has been several times used already in the debate.
Let us look at some of the suggestions that the report makes. It suggests in paragraph 28, for example, that since the object is to take into account the views of the House of Commons, we have made progress in the form of motion
under which the Government tables a 'take-note' motion … and Mr. Speaker takes a liberal view when considering whether or not to select any amendments tabled.
The report designates that as being "in the main satisfactory."
There is a fundamental difference between views expressed in the s
House—which can, of course, be useful, and can influence the behaviour of the Government—and the view of the House. There is only one way of ascertaining the view of the House, and that is by a resolution or a motion which is either not opposed or which is carried by our normal means. But we know, in fact, that this is avoided in the majority of cases, and that in the majority of cases the House is not invited to approve or disapprove the proposals, and even when amendments to a motion have been debated, they have fastened upon one aspect, in general terms, of a general approval or disapproval of a set of proposals.
The reason why this happens is not any mulishness on the part of the Government or any lack of keeness on the part of other hon. Members. It is because of a recognition of what the right hon. Member for Yeovil (Mr. Peyton) stated—that we do not wish or think it practicable to tie the Minister in the Council of Ministers hand and foot to every particular, and we do not even consider it practicable for the House of Commons to approve or disapprove the particulars in a proposal. Indeed, the proposals themselves are often in a considerable degree of generality such as not to admit of the kind of debate and


decision which in our domestic matters we are accustomed to. So we are confronted straight away, in this part of what the report is saying, with the incompatibility of the expression of the view of this House with the reality of what happens in the Council of Ministers within the Community.
Then I take a second proposition. In paragraph 25, it is suggested that
If necessary, the Government should consider accepting the descipline of a Standing Order under which there would be a maximum period laid down within which debates would have to be held after the Committee had made their recommendation.
If the House will forgive my saying so, that is entirely unrealistic. It is unrealistic to suppose that the Scrutiny Committee puts forward 10, 15 or 20 proposals of the Commission which it thinks require the attention of the House and they have to be debated within 10 days, 15 days or 30 days. In some circumstances that period will be absurdly short. In other cases it will be absurdly long. For the business of this House cannot possibly be so co-ordinated with the business of the EEC that we can have an orderly progression from the recommendation of the Select Committee that a matter deserves the attention of this House to a consideration of those proposals, and then to procedures in the EEC.
On the contrary, what we shall be faced with, in the nature of things, is that there will be, from time to time, as we have experienced in these cases, a sudden realisation that a matter is to be dealt with by Ministers in the Council of Ministers which has been recommended for the attention of this House by the Select Committee and which therefore, somehow, if possible, has to be brought before this House.
May I mention that we have had a very bad experience in the House of Commons over fixing maximum periods for consideration by the House. We suffer disgrace when we enact in statutes that a Statutory Instrument can be prayed against within 40 days and deliberately do not do it. If we were to have such a Standing Order as this we should find ourselves promptly devising methods whereby we did not observe the Standing Order.
However, there is a third way in which, more drastically and more recently, the

gulf between the form and the reality has been brought to the attention of the House. When we first knew that we would have this debate we thought that it would be a skimmed milk powder debate. It has turned out to be much more a New Zealand butter debate, for it was in the course of examining what happened in that context that the House became aware of another aspect of the incompatibility between the nature of the Government and legislation of the Community and the control, which we all talk about as if it were an accepted principle, of that Government and legislation by this Chamber.
We found that under Protocol 18 of the Treaty of Accession decisions in regard to New Zealand butter were to be taken in the Council "acting on a proposal from the Commission". But there was no such proposal. We had a debate on Monday night and Tuesday morning, but there was no proposal by the Commission to the Council before the Council, let alone before this House. It was fairly doubtful what in fact we had before this House, but what was quite clear was that the purported proposal from a Commission was a blank cheque for the all-important items to be filled in by the Council.
Then we were told, during the debate, that in the course of that meeting of the Council an entirely new set of proposals was produced by the Commission, although upon that the Council did not act. The hon. Member for Farnworth (Mr. Roper), in the course of exchanges this afternoon, pointed out that the reality of the behaviour of the Council was not in accordance with the constitutional procedure which, as the right hon. Member for Knutsford (Mr. Davies) has several times emphasised, is laid down in the treaty. Of course if the treaty procedure were followed in its natural sense, and the Council did not do anything except in terms of a proposal previously made, published, and, therefore, available to the Scrutiny Committee and to this House, then, no doubt, we could devise some procedure whereby we could get hold of it in time. But the right hon. Member for Knutsford says, "If during the sitting of the Council Commissioner Lardinois suddenly pops up with another set of proposals, these must be hauled bck so that they can be considered by the Scrutiny Committee, the Scrutiny Com-


mittee can take evidence from the Minister and we can have a debate in this House."
What has happened is that the realities of power, the realities of what the Community is like and is bound to be like, have prevailed, are prevailing and will prevail over the letter of its constitution. The letter of the constitution is giving way to reality. The reality is that the nature of the legislation of the Community and the nature of the power of the Council of Ministers are incompatible with the proposed control, proposal by proposal, by this House of what is assented to by Ministers in the Council of Ministers.

Mr. John Roper: The right hon. Gentleman suggested that I had said that the Council was acting illegally.

Mr. Powell: indicated dissent.

Mr. Roper: When the right hon. Gentleman reads Hansard he will see that he referred to the illegality of the Commission's action. The Commission is interpreting the Treaty of Rome as allowing the resubmission of alternative proposals during a meeting. There is nothing in the Treaty of Rome which says that the Commission must previously submit proposals to the Council of Ministers and publicise them.

Mr. Powell: I did not attribute the view to the hon. Gentleman that the Council would in those circumstances be behaving illegally. The only context in which I referred to illegality was in the context of what would have happened if the Council had acted on the non-proposal which we were seized of on Monday night, namely, a proposal which was no proposal because it did not have in it the crucial data. I would be prepared to argue that in those circumstances the Council was not even formally acting in accordance with the treaty. The spirit of the treaty—the natural understanding of it which many of us have—is being transmuted by the realities of power and by what the Community is about.
That came out in the debate about bargaining in which the right hon. and learned Member for Hexham (Mr. Rippon) took part. When we legislate there is no question of a bargain. When

the House of Commons throws out Clause 32 of a Bill the Government do not put it back again before presenting the Bill to Her Majesty for the Royal Assent—unless they can carry a vote. They do not put it back silently on the ground that it is a good Bill generally and we gave it our blessing on Second Reading.
Yet that is exactly the argument which comes from the Council of Ministers, and it is the argument which was common to the right hon. Gentleman the Minister of Agriculture and the right hon. and learned Member for Hexham. They said that this was a different process altogether from the legislative process. They said that these were decisions taken by plenipotentiaries, collective decisions, much more resembling the decisions of the Cabinet than the decisions of the legislature. Therefore, said they, and rightly, it was impossible to unpick what was done so that the House could consider each of the separate items, say "Yea" or "Nay" to them and either send the Minister back to Brussels to do the best he could or endeavour to censure him when he came back because items (a) and (b) were disagreeable to them as they were disagreeable to him.
I say to the House, even more emphatically than did the hon. Member for Southampton, Test, by all means let us pass a resolution—it will sharpen our minds if it does nothing else—which in terms requires that assent shall not be given in the Council of Ministers to proposals of the Commission until they have been submitted to the opinion of this House. I would be very happy to see such a resolution so that we could, by attempting to operate it, understand how incompatible with the control of the House over the laws under which the people of this country are to live and the policies by which their lives are increasingly to be affected is membership of the Community.
Sooner or later, as was always intended and as the advocates of British membership for the most part honourably have never concealed, the authority of the House is intended to diminish and intended to be ceded to other authorities which derive their responsibility from different sources altogether. We shall not alter that by improvements in procedure or by passing procedural resolutions. By


all means, if it helps us to get that clear, let us have a procedural resolution. In that I shall make common cause with the right hon. Member for Battersea, North (Mr. Jay).

12.2 a.m.

Mr. John Roper: I totally agree with the last words of the right hon. Member for Down, South (Mr. Powell). Clearly, in joining the Community we were moving into a situation where power would move by stages to different organisations. One of those is the Council of Ministers and another will be a directly elected European Parliament. There is no difference between us, although we may differ about the value of such institutions.
I defend the view of the Select Committee on take-note motions with the power for the House to table amendments. That procedure is right because proposals that come before the House are only proposals of the Commission, particularly if we receive them at an early pre-legislative stage. Those proposals can be changed. At that stage the Government do not necessarily want to hear support for their view. They want to hear the views of the House. The take-note debate, with the power for the House to express its view and to amend, is the right form of motion.

Mr. Nigel Spearing: Will my hon. Friend concede that the power to amend depends upon whether the Chair selects a particular amendment? Does he recall that on the first set of documents on energy policy an amendment disapproving the documents was tabled because they removed the power of the House over our energy resources, but the Chair did not accept that amendment?

Mr. Roper: I do not wish to be drawn into explicit or implicit criticism of the Chair. I commend the more liberal attitude of the Chair towards amendments and hope that it will continue.
The right hon. Member for Down, South also criticised the timing. A fixed limit requires much thought. There is a considerable range in the period between a proposal being made and its adoption by the Council of Ministers although agricultural proposals are the most difficult.
The most serious problem is that which was mentioned on Monday and which I raised with the Minister of Agriculture, Fisheries and Food today—the power of the Council of Ministers, with the compliance of the Commission, substantially to modify proposals during a meeting of the Council of Ministers. I say "with the compliance of the Commission" because I understand that, to keep in line with the treaty, when the chairman of the Council of Ministers has the sense that there is a change he suggests to the members of the Commission that they withdraw and submit an amended proposal. I have never been there, but I am glad to see that my right hon. Friend agrees with that description.
This means that at the end of the day the proposal which Ministers may be under considerable pressure to agree, because it is part of a package or because of the sort of solidarity which builds up between the Ministers of different countries on such occasions, may be rather different from that debated in the House. I do not believe that we shall be able to lay down a very firm rule about this. To a certain extent we must accept it, because of our belief in the good faith of the Minister, the belief that if the amendment goes beyond what he senses to be the wishes of the House, or what he feels he will be able to get accepted by the House, he will say "I am unable to agree this until there have been further discussions in my country."
If we accepted a Standing Order of the House along the lines suggested by my right hon. Friend the Member for Battersea, North (Mr. Jay), the Minister would be seriously handicapped in the negotiations. If there were any change, if the Commission during the course of a Council of Ministers meeting produced an amended proposal—even a minor amendment, even an amendment to take account of criticism made in this House during a debate—as far as I can see the Minister would not be able to agree to it. He would have to say "This is a different proposal from that discussed by the House. I shall have to have another debate. It will have to go to the Scrutiny Committee before the Council of Ministers can agree it." Therefore, such


a Standing Order would have considerable drawbacks, and should be carefully considered.
I should like to say a few words about the skimmed milk. Nobody would try to defend what seems to almost everybody to have been an indefensible policy, taken by itself. It was unsatisfactory, even at Community level, as a way of dealing with the problems of the dairy sector. Although I can understand why it was arrived at as a possible compromise, because people were reluctant to take the more radical measures needed to deal with the dairy industry, it does not seem to be defensible. But I cannot agree with my hon. Friend the Member for Southampton, Test (Mr. Gould) that we should not accept it because it was not particularly to the advantage of this country.
Within the Community there may well be times when particular items in a package, such as a price review package, are not particularly to the advantage of this country. There may be items which are neutral or slightly disadvantageous but which we have to accept. In the same way, it is not particularly to the advantage of the German taxpayer to have a larger regional fund, yet we are not terribly happy when the Germans veto increases in it on the ground that it is not to their advantage.
In a community we must take matters overall, the rough with the smooth, on the assumption that we shall be in balance. Therefore, the criticism of the skimmed milk policy is that it is a bad policy at Community level as well as the narrower argument of the advantage or disadvantage to the United Kingdom.
We should consider whether we can find, both within the Scrutiny Committee and within a rather more satisfactory form of Standing Committee procedure than has operated so far, a way to make sure that Ministers are more aware when they go to Brussels of the range of views which the House has. We should not tie ourselves to the totality of the Danish solution. The fact that there is a committee in the Danish Parliament able to discuss with a Minister before goes to the Council of Ministers the general range of policies, and that he can get a sense of what measures would be acceptable to the Danish Parliament and

what would not, has some advantages. It would mean considerable changes in the procedure of this House.
My hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh) sees it as a series of specialist committees covering each area. That may be elaborate, but here I should like to come to the question of skimmed milk, New Zealand butter and agriculture to which the report of the Scrutiny Committee referred, areas in which things change at an hour's notice—it would be to the advantage of the Minister and of the House if there were a permanent Committee of the House able to discuss, not in the way the Scrutiny Committee does, but to discuss with the Minister the merits of issues coming up at Brussels, and on occasions able to make sure there is a full debate in the House. This is a relatively small change in our procedure, but, realising that the whole agricultural scene is different in procedures from most of the other Councils of Ministers, we could make progress here and make sure that the interests of this House are better represented.
I conclude as I began, in a sense. I do not think that this will be dealt with in the long run only by changes in this House, by amendment of the European Communities Act or by changes in the Treaty of Rome. We shall see demoratic control develop by ensuring that we have directly elected European Parliament which has powers of co-decision with the Council of Ministers.

12.12 a.m.

Mr. Peter Mills: I have the privilege of being a member of the Scrutiny Committee and not only is it a privilege, but we seem to be able to reach an agreement on most matters without a vote. Even though some of us are pro-Market and others anti-Market, we seem to reach agreement.
The House has a difficult problem before it tonight which should be solved. The House must realise, too, that members of the Scrutiny Committee feel that they have been let down over what has happened over this skimmed milk business.
If I may take the House behind the scenes of the Scrutiny Committee on the issue of skimmed milk, without boasting I think that I played a leading role in


persuading my colleagues to allow the Minister to go forward without a debate in the House of Commons. I did so because I know the problems that the Minister was experiencing. I know, too, that through various channels he had pleaded with us to allow this to go through without debate. There was another reason why I tried to persuade my colleagues to allow that to happen—the situation in the whole of the agriculture scene. We were waiting for a price review. The spring was upon us and farmers wanted to know how they were going to plan and to deal with the future. The price review had been delayed certainly much longer than other price reviews when we were not in the Community.

Mr. Marten: What sort of farmer plans in April for his summer? Could he not wait another week or so?

Mr. Mills: No, I do not think so. As I was trying to explain to the House, we had already been delayed for many weeks. The price review had been put off. I believe that the price review should be announced just after Christmas so that farmers can understand the situation and plan for the future. [Interruption.] Will my hon. Friend the Member for Banbury (Mr. Marten) stop muttering? He can make his speech later, Mr. Deputy Speaker, if he catches your eye.
I sought to put forward to my colleagues this important point about the delay. That was another reason for my wanting the Minister to get on with his task and to come to some settlement in Brussels. The Minister made it quite clear to us in the Scrutiny Committee that he was opposed to a compulsory method. There was no doubt of that at all. He wanted a voluntary method. In many ways we trusted what he said. I believe that he accepted the fact that we did not make or contribute to this mountain of skimmed milk powder. Every one of us understood that he would go forward and seek to obtain agreement on a voluntary method.
I say honestly to the Minister, with respect, that I do not think that it was such a good deal in the long run, especially if we make out a balance sheet of what he obtained and what he lost. True, he moved forward in regard to beef and

the deficiency payments, but in the long term it was a fundamental mistake to accept the proposals of the Community on skimmed milk, because they did not go to the root of the problem and insist that those who were creating the mountain of skimmed milk should bear the consequence of their actions. That did not happen. Indeed, we have seen nothing coming out of the Community to deal with farmers who simply produce milk for intervention.
In the long term, if we strike a balance sheet, this is not a very good deal. The advantages that the Minister gained on beef are outweighed by what has happened with skimmed milk. The cost to the consumer and the farmer will rise.
Another point not made so far in the debate is that unless we deal with those who go on producing milk for intervention and creating the skimmed milk problem, we shall have to go on with a system of incorporation of skimmed milk powder in the feed rations. If it is successful this year, the Community will want the system to continue. That is what is so wrong. I do not believe, on balance, that the Minister's package deal was as good—

Mr. Peart: I know the hon. Member's views and I respect him—he was a departmental Minister concerned with agriculture—but would he veto the package? Would he wish to take away the award to the dairy farmers, the beef premium, the advantages gained for the hill farmers, and so on? Let him say so straight away.

Mr. Mills: I am not so sure that the veto is the only method.

Mr. Peart: There must be a veto—

Mr. Mills: With respect, if the Minister will listen for a moment I shall try to make my point clear. Although the veto is the final method of dealing with the problem, I believe that the Minister could have taken a much tougher attitude in getting the package deal. If the boot had been on another foot and if, say, this had been the French Government, I am certain that they would have taken a much tougher line and been insistent.

Mr. Peart: The French Government did the same as we did.

Mr. Mills: I may be wrong, but that is what I feel,
I believe that the Scrutiny Committee trusted the Minister. I think that I made a mistake in persuading my colleagues to take the course that they took. The Scrutiny Committee is now very wary of granting its permission. We have not given it in respect of butter. That is why we had the problem that we experienced the other day.
When the Minister comes to the Scrutiny Committee, it is important that he is perfectly frank if he feels that he may have to do a package deal and that his own views may be overridden. I believe that we have to get these procedures right. This House must take the Scrutiny Committee far more seriously, because this will happen again. There are bound to be occasions on which the Minister comes to the Scrutiny Committee and says "For heaven's sake, give me permission. I have to do a deal". I believe that, once bitten, we are twice shy.
The House must realise that the Scrutiny Committee bears a very heavy burden. The House is trusting us every week to make decisions. We bring before the House only those matters which we feel need debating. Therefore, when we bring them before the House, I hope that the House will take them far more seriously than it does at present. I hope, too, that the Minister will take the Committee more seriously.
Perhaps I might comment on the Danish system. When I was an Under-Secretary of State for Northern Ireland, I was responsible for agricultural matters in the Province. I had the privilege of accompanying various Ministers to Brussels, where I learned the ropes. The Danish Minister of Agriculture is absolutely controlled by his own Scrutiny Committee, and there were occasions when he telephoned during the night to ask permission to do this or that. That is quite intolerable in my view—

Mr. Marten: Why?

Mr. Mills: I would never support such a procedure. At the end of the day, for all his telephoning, he arrived home only to be sacked. The problem was about pig meat prices. But he might just as well have taken the course which he knew he should take, without all the

telephoning. I am opposed to the Danish method of proceeding.
The Minister must be given latitude. He has to bear the responsibility and he has to come back to this House and, if necessary, to carry the can. Then, if we feel strongly enough, we have to take action and to debate the matter. That must be the way.
I want finally to suggest one or two courses which must be adopted. First, if the Minister comes to the Scrutiny Committee and asks us for what might be described as a concession, he must be far more frank than perhaps he was over skimmed milk. Secondly, we must be informed—[Interruption.] The Minister is sitting chittering. I do not say that in an unfair way at all. I believe that he must take us into his confidence when a package deal is about to be made. He must be much more frank than he was over skimmed milk.
Secondly, the Scrutiny Committee must be given more time to consider these matters. In other words, the means of communication between Brussels and the Scrutiny Committee and between the Ministry of Agriculture and the Committee must be improved. There seems to be a long delay sometimes.
Thirdly, the House must take these matters far more seriously if it wants a Scrutiny Committee and if it wants us to continue in the Scrutiny Committee. The House must take us far more seriously.

Mr. Peart: I am sure that the Chairman of the Scrutiny Committee will accept that I have always been courteous and, with my officials, given the frankest advice.

Mr. Mills: I was not suggesting otherwise.

Mr. Peart: That was the implication of the hon. Gentleman's remarks.

Mr. Mills: The Minister has missed the point again. I believe that more time must be given to debate the matters that we suggest should be debated on the Floor of the House. Otherwise it is a waste of time. To go on having these debates late at night for one and a half hours is not good enough. I do not mean to be rude to the House, but every single debate we have had so far has


been a shambles. It is not in the interests of the House for this to continue.
I am certainly not skilled enough to advise or suggest a way of getting over these problems, but I believe that the Leader of the House and others must put their heads down, take this far more seriously, and devise a system which will accommodate the problems brought forward from the Scrutiny Committee.
I do not feel that there is much point in my going on in the Scrutiny Committee unless there are some major changes. Having said that, I believe that the Committee can and must play a very important role. But somehow, the shambles has to be stopped.

12.27 a.m.

Mr. Nigel Spearing: The House will congratulate the hon. Member for Devon, West (Mr. Mills) on being so frank.
We are debating the relations between this House and the executive, and the executive we now have is not just the one in Whitehall;it is a double-deck executive. It is a strange, and very powerful vehicle indeed. We are trying to adapt the procedures, which we have developed historically over the years and which have been the safeguard of British freedom and democracy, to a new form of executive. That is the heart of our trouble.
As I understand it, and trying to be objective, surely there are three broad solutions put forward by hon. Members about the way in which the EEC executive should work. There are the avowed federalists who believe in a directly-elected Assembly, replacing this House. There are those who support the present situation—a reasonably strong legislative function with regulations, with the Council and Commission making laws, sending them to the Scrutiny Committee, and having some of them debated in this House. Then there are those of us who back the Community as a strong international organisation in which strong cooperation can grow.
With the first two alternatives there are, and must be conflict between the executive in Brussels and the procedures of this House. Only with the third solution is long-term compatibility reached.
We are stuck with the second solution —and we have a curious and dangerous

vehicle here. It is a hybrid machine, because the basis on which the Council and the Commission produce documents —whether they are fast moving or slow moving—means that we have a legislative engine of which we have no knowledge of the verba. I am not complaining about that, but we have no record of its act-out—not even one communally agreed statement, or minutes, as one would have at a local council meeting, or with a journal of the House. This very strong legislative machine is part legislative and part a dealing arena where package deals are constitutionally made. As far as I can make out, particularly as a result of recent events, it can change suddenly from a quasi-legislative function to a package-dealing function in the twinkling of an eye, and back again.

Mr. Julius Silverman: Does my hon. Friend agree that it is legislation by horse-trading?

Mr. Spearing: My hon. Friend is right, and that is inherent in the constitutional structure of the Commission and the Council as established now and the way in which they operate. Package dealing always has its limitations and its disadvantages for a democratic State. We all know that, because if one makes decisions not on the merits of the matter but on the strategic political picture of the time—which may be related to quite different issues—one is likely to get the wrong decisions. If we do that time and again, this House will react like a body rejecting a transplant. It may reject it, but sometimes the body dies, and that is the dilemma facing us.
The additional fact is that the package dealing gets wider and wider because those who wish to empower the executive with greater strength would much prefer to include it in a package deal than in a regular legislative programme which we approve and find more congenial.

Mr. Hugh Dykes: Does the hon. Gentleman agree that there is some special differentiation between the way in which this House scrutinises matters arising from, say, agricultural packages and agricultural deals, and the way in which it deals with other EEC legislative instruments, particularly directives, where there is plenty of time for consideration? And does not this mean


that there is a lot wrong with the CAP as structured?

Mr. Spearing: Yes. The hon. Gentleman is approaching a point that I was going to make. Unfortunately, the regulations comprise all varieties. That is another problem in this strange legislative animal that we have accepted through the referendum. Anything from a White Paper or a statutory instrument to a Bill or a treaty can be in what is called a regulation. There is no distinction one from the other. If what we heard on Monday night is to be believed, one can start with a legislative instrument and it is suddenly turned overnight into a Bill—in effect into something that is horse trading. The hon. Gentleman may be on to something. It would be a good thing for the Commission to change the classification of regulations—I do not know whether the treaty would allow it —so that there is some regularising of these strange documents that pour forth in such great numbers and change their nature more or less overnight. That would enable us to deal with them in a more systematic and more satisfactory way.
We are entangled in something else, too. Instead of facing a series of one-off treaties described by the right hon. and learned Member for Hexham (Mr. Rippon), any Minister is surrounded by a barbed wire entanglement of treaties. We have taken on this situation, and the Minister finds that at every turn. Unless we in this House and the Commission and the Council come to terms with the facts and try to regularise these matters in a more satisfactory way, we shall always get the trouble that we have had during the last fortnight.
I now turn to what we can do in this House, what has been done, what has not been done, and what might be done. There is always a tendency on the part of the executive to try to limit the power of the legislature. There is a proper balance and thus a creative tension in a parliamentary democracy. It is something that my right hon. Friend would wish to encourage, particularly the part played by this House. For the past six or eight months the Government have always said "Have patience. We have difficulties, but we are trying to find a means by which

we can resolve all these difficult matters". I cannot find these repetitive claims valid. My right hon. Friend tried to do it again on Monday night. I do not think that the Government have been at all helpful to Westminster.
I wish to consider particularly some matters concerning procedure, because it seems to me that the wheel of democracy runs on the bearings of procedure. However wonderful a wheel we might have, if the bearings become jammed because they have not had sufficient lubrication, not only do squeaks occur and the box get hot; in time the shaking up and the vibration on the
road destroys the wheel. The Government have not been very good in this regard in the last year; indeed, they have been very bad.

The Minister of State for Agriculture, Fisheries and Food (Mr. E. S. Bishop): My hon. Friend mentioned Monday night's debate, with which my right hon. Friend was concerned. Does he not admit that the fact that we are having this debate tonight—with all the sincere comments that have been made by hon. Members on both sides of the House, indicating the almost impossible position in which Ministers have been put—indicates that the need is for a change in procedure? That is what is being debated tonight. Surely my hon. Friend would be more fair to all the Ministers who had to negotiate in Brussels if he appreciated that by the procedure we followed we have put Ministers in an impossible position, which must be changed as soon as possible.

Mr. Spearing: I am sorry, but I cannot agree with my hon. Friend. I agree that Ministers are placed in an impossible position, but I do not think that this House has placed them in that position. The situation was inevitable, as a result of this House having taken upon itself the Treaty of Rome and having passed the European Communities Act. Many of us were opposed to the Act, not for chauvinistic reasons or anything of that kind but because we saw the fundamental constitutional difficulties that would arise and particularly the effect upon this House and the freedoms of British subjects. We have an unwritten constitution, based upon this House taking power from the executive and keeping it. That is a fundamental fact.


I shall return to my point about procedure. Before the referendum, in connection with discussion of this document the Government arbitrarily said "We can discuss these matters only for 1½ hours", founding that statement purely on the analogy between the EEC regulations and our domestic Statutory Instruments. But there is no comparison between supranational legislation and secondary legislation in this country.
After the referendum was complete—in fact, even before it was over—the Select Committee on Procedure proposed a series of fairly complex recommendations about the way in which we should proceed. My hon. Friend the Member for Penistone (Mr. Mendelson) and I were members of that Committee. We published our recommendations a year ago—last May— but it was not until last November that the House was allowed to debate them. On the Thursday before the debate my right hon. Friend the then Leader of the House said—this was on 30th October—that
this debate will be based on a number of motions to amend the standing orders in accordance with the recommendations of the Select Committee of which the hon Member is a member.—[Official Report, 30th October 1975; Vol. 898, col. 1765.]
He notified his hon. Friends in the usual way that he expected their support on the following Monday, but on the following Monday-3rd November—we found that the Government were not putting down motions to implement the recommendations of the Select Committee, in two vital particulars; they were not allowing the Committees to whom the regulations were committed power over their own motion, or power over their own time. The Committees were specifically cut out from the Government amendments. My right hon. Friend the Leader of the House, no doubt believing what his predecessor said, went gaily into the Lobby and voted away those powers.
So, from the time the new procedure was introduced last November the recommendations of the Select Committee have been thwarted. Worst still; there was no new set of Standing Orders specifically tailored to the precise needs of the regulation. We proceeded under Standing Order 73A, relating to the Statutory Instruments of this House—an almost unbelievable situation. Worse

still; at the end of the debate, winding up for the Government, the then spokesman said:
we undertake, if the House will pass it
—referring to the amendment—
to lay a further amendment in the near future to give effect to the general wish of those who have spoken in the debate.—[Official Report, 3rd November 1975; Vol. 899, c. 102.]
He was referring to the allowing of more time. He was saying, in effect, "Only pass this and we will give you more time to discuss this matter, even if you have not power over your own motion upstairs."
That pledge was given by the Government six months ago, but the "near future" of 3rd November has not yet arrived. We have still not had the changes in Standing Orders. Hon. Members debating European regulations find that the guillotine comes down after one and a half hours, when the debate has not been exhausted. Is it any wonder that some of us are suspicious of right hon. Friends in the Government who give pledges of this sort but do not redeem them? It is almost a nightmare situation.
The situation became so bad that the Scrutiny Committee put down, en masse, Early-Day Motion No. 158:
That this House deplores the inadequacy of consideration of important EEC measures, both in Standing Committee and on the Floor of the House; and calls on the Government, as a matter of urgency, to improve the timing, form and nature of such debates.
The names on that motion were headed by that of the Chairman of the Committee. Yet still nothing has been done.
This is the sort of charge I put to my right hon. Friend the Leader of the House. It does not give us confidence.
Whatever the problems in Brussels because of the nature of the legislature, not much has been done here to ensure that we receive documents and give them the consideration they are due.
Because of the time factor, I refrain from commenting on the hopeless procedure for the ratification of treaties. On 5th December last year, we ratified seven treaties and some amendments to the Treaty of Rome. Only the right hon. Member for Down, South (Mr. Powell) and I spoke on that occasion. Why was nobody else here? Because the words


"Treaty of Rome" or "amendments" did not appear on the Order Paper. They did not even appear on the front of the Statutory Instrument itself. Only in the last paragraph did it mention the treaties included in the schedule, and one had to turn over the page to discover the treaties involved. It is time the Government took another look at this procedure, particularly as the Speaker who has just retired drew attention to our disgraceful Statutory Instruments procedure.
The present situation with Standing Orders is very unsatisfactory, and the House was treated in a shameful way on 3rd November. An indication was given that the recommendations of the Select Committee would be accepted and they were, in fact, rejected. There have been many complaints, but nothing has been done. It is only when we get an explosion over milk or New Zealand butter that we have the opportunity to air the complaints.
I know that my right hon. Friend the Leader of the House has a great deal of concern for the democratic process. The Government must look at this matter and the nature of proposed regulations.
We can have an understanding on categorisation. I understand that in the quick-moving situation of agriculture it may be appropriate to have package dealing—though not on other matters. If the House is prepared to permit package dealing, it should be within limits that are well understood.
It is incumbent on Ministers to ensure that we put up democratic defences against what might be arbitrary legislation. The majority of Governments in EEC countries are not awfully antagonistic to the aims of our Government—but that attitude could change. For the sake of our democratic institutions and the good name of the Community in this country, the Government should consider these matters soon and change the Standing Orders so that we have a group of Standing Orders specifically dealing with the needs and requirements of the legislative machine in Brussels.

12.45 a.m.

Mr. Neil Marten: It is getting late, Mr. Deputy Speaker, and I do not know when the debate is due to end.

Mr. Foot: At 1.14 a.m

Mr. Marten: I do not know how long the right hon. Gentleman wants.

Mr. Foot: Twenty miniutes

Mr. Marten: I think that my subtraction is all right. It is a pity that these debates should take place at such a late hour. One snag is that they do not get in the Press the next day. My hon. Friend the Member for Harrow, East (Mr. Dykes) seems to think that is very funny. The point is that the public do not know what the issues are. I know that my hon. Friend feels that is hilariously funny, but it is not. It is rather serious.

Mr. Roper: I hope the hon. Gentleman noticed that yesterday The Guardian gave a full account of the debate that we had on Monday night, on butter. That report was published two days later.

Mr. Marten: It did not catch my eye. I did not notice any headline. I noticed a tiny piece tucked away at the bottom of a page in The Times. I am grateful that The Times, with its massive attendance in the Press Gallery at this time of night, should remember to do that. But these important subjects are kept in the dark. I am sure that the right hon. Gentleman will recognise that straight away.
I am glad that the debate has not dealt specifically with the subject on the Order Paper—skimmed milk. Very few hon. Members have mentioned that matter. The debate is really nothing to do with skimmed milk. That was the cause of the debate, but it is just as much to do with New Zealand butter. This is a constitutional matter.
I believe that one hon. Member asked "To what extent can we do what is proposed?" My personal Scrutiny Committee-I am the only member of it—gets all the papers from the Vote Office. I go through them, throwing away quite a lot as being irrelevant. However, I read the Questions and the answers in the European Assembly. The hon. Member for Moray and Nairn (Mrs. Ewing) tabled a Question about harmonising scrutiny in the various countries. The answer by the Council of the European Communities was:
How far the member States scrutinise proposals for EEC legislation at national level


and what methods they operate for this purpose is their own responsibility. The Council does not think that it should examine or express views on this question.
Therefore, what we do is entirely up to us.
What worries me is that when we have a debate—perhaps for an hour and a half—to take note or on the Adjournment, the Minister always says "I shall take note of what is said in the House and bear that in mind when it comes to negotiation."
The question that I put to my hon. Friend the Member for Saffron Walden (Sir P. Kirk) was what he took note of. I asked whether he took note of speeches made only in the House, or also in other places. My hon. Friend, in evidence, said that he took note of views expressed in the corridors of the House. If so, it gives enormous latitude to the Minister who is going to Brussels to say "I heard the speeches in the House, but when I padded round the corridors I got an entirely different view." It reminds me of the way Members used to elect Tory Party leaders in the old days.

Sir Peter Kirk: This is the second time that my hon. Friend has referred to what I said before the Scrutiny Committee. I said that we needed decisions of the House but that there were many occasions when we did not get them. I regard it as my job—I am not a Minister, thank God—to try to get the informed views of my right hon. and hon. Friends for the guidance of those of my hon. Friends who work with me in the European Parliament. I used the word "corridors" in that evidence—I did not use the word "gossip"; that was my hon. Friend's word—to indicate that I carry out, as I think my hon. Friends carry out, fairly full discussions with my hon. Friends, as members of the same party, which seems to me to be totally reasonable. I imagine that the same thing is done by Labour Members. I cannot understand why my hon. Friend is obsessed with the idea that I spend my entire time prowling the Corridors of this House like a prostitute looking for clients.

Mr. Marten: The word "prostitute" was my hon. Friend's own word. I never said that. He put those words into his own mouth, and he used them.

Sir P. Kirk: I used it; it was one word.

Mr. Marten: Plural. I shall not weary the House with this matter further, because anyone in. the House can read it on page 44 of the Minutes of Evidence given before the Scrutiny Committee on 16th March. It is all there.
I recall that in the debates in 1972, when we raised this question—then from the Government side of the House—we were always told, and so often, that if a Minister went off and agreed something that the House did not like, we were perfectly all right, because we could always sack him when he returned, and that sort of thing. That was the firm impression that was given. On this occasion, the Minister did just that, and the Opposition, whose duty it would be to move a motion of censure on the Minister, failed to move a motion of censure. The Minister failed to resign. Therefore, all that safeguard that we were told was ours has broken down.

Mr. Rippon: Will my hon. Friend give way?

Mr. Marten: I have only a short time. Perhaps we could have a drink on the point. If the safeguard has not broken down, it is not working. Perhaps there is a slight difference between the two. However, certainly it is not working.
Will the Leader of the House look into a further question? During the 1972 debates we were given various assurances by the then Conservative Ministers. In fact, on the evisceration of chicken I made a speech at about midnight on 26th April on the question of New York-dressed chicken, evisceration, plucked fowls, and so on. Bringing it back to mind, I find it quite extraordinary how much I seemed to know about it then.
Then, as reported at column 1719 of Hansard, the Minister of Agriculture—

Mr. Rippon: Column 1711.

Mr. Marten: Column 1711. I stand corrected. The Conservative Minister of Agriculture said:
I certainly give the undertaking to the Committee now that we have no intention of allowing a situation to arise where this trade
—that is, the trade in non-eviscerated chicken, and so on—
cannot continue if by 1976 it is still important for us.—[Official Report, 26th April 1072: Vol. 835, c. 1711·1]


We know that it is important to us. What I want to know is whether the assurance given by a Conservative Minister, that we need not have this evisceration if we do not want it, carries over into a new Government?
These are the sorts of problem that are thrown up in this debate. The right solution is the one proposed by my right hon. Friend the Member for Knutsford (Mr. Davies) in the letter in which he said,
The best way forward will be for you
—that is, the Minister of Agriculture—
to go forward with the negotiations next week but not to give final agreement to the instrument until you have made a report to the House and the debate has been held. Presumably this can be done quite quickly.
I am sure that my right hon. Friend the Member for Knutsford is quite right and that the House ought to support him in that general idea. That is one solution that is broadly the answer.
Then we come to the famous fast-moving documents, about which we hear so much. The Community must get used to the fact that there are nine national Parliaments with which it has to deal. We are a party of Europe de patrie people, and we are essentially nationalists. The Community must recognise that and amend its procedure.
There are two types of document. One is the draft—there is a great amount of mirth on the Opposition Front Bench.

Mr. Rippon: All around.

Mr. Marten: And all around. I feel that we are touching on some rather raw spots, and that the only defence of some hon. Members is mirth from a sitting position—which is quite a good position from which to laugh.
What we have is a draft regulation, which the House of Commons debates and either approves or disapproves. If the motion on the Order Paper is the right one it can take note or amend it. If there is any significant difference in that regulation when it comes to the Council of Ministers—and I used the word "significant" rather than "enormously substantial", or whatever—the Minister should bring it back to the House
We have already dealt with the second category—the question of negotiations. I believe that the Community must accept that we can delay things. We were told during the New Zealand butter debate that there was great urgency about it because if it were not concluded it would be disastrous for New Zealand. What has happened? Nothing at all was concluded, and it will be taken next month. All this "fast-moving document" stuff is really a cover for fixing things up without the consent of the national Parliament. My hon. Friend the Member for Devon, West (Mr. Mills) referred to the speed needed for the farmers to plan for the summer. I would love to know what farmers are planning in mid-April that cannot wait another week. All their sowing and planning has been done. Therefore, we must look carefully at this question of "fast-moving documents".
It is vital to keep parliamentary control over Community documents. The only way to do it is to keep Ministers on a very loose chain so that whenever they do something wrong we can nudge the chain a bit and drag them back here and ask them what they are doing. The EEC will have to learn that patience is a virtue.
I believe that the best solution is the one proposed by my right hon. Friend the Member for Knutsford. That was agreed by my right hon. Friend the Member for Cambridgeshire (Mr. Pym), who, when I asked whether he agreed with it, said he did. Therefore, we have the Chairman of the Scrutiny Committee and the Conservative Front Bench spokesman on agriculture agreeing with it. The Leader of the Opposition said, in a speech on 28th February this year:
This Parliament, and no other body, is elected to run the affairs of this country in the best interests of all the people".
I totally agree with the Leader of my party.

12.58 a.m.

Mr. Foot: I apologise to other hon. Members who wished to participate in the debate, but I would like to try to reply as best I can to the general debate. I am not being patronising in any way when I say that I think the debate has been extremely helpful in our objective of finding a solution to the problem, if a solution is available.
I want first of all to turn to the speech of my hon. Friend the Member for Southampton Test (Mr. Gould), because, although not putting an extreme point of view, he put in the fullest clarity, the view that it was the passage of the European Communities Act which had changed the relationship between this House and Ministers in various different ways. He argued that Ministers appeared before the House in a somewhat different guise now than they did prior to the passage of that Act, that Ministers could not be held so directly responsible in many of their actions as they were before the passing of the Act and that there was a different manner and form of debate on these matters. I do not dissent from one word he said. I have said as much in many debates, and I do not propose to eat my words on the subject, although that sometimes seems to be the sole item on the menu at the Dispatch Box.
I agree that the passage of the European Communities Act has altered this relationship. That was confirmed by the right hon. Member for Down, South (Mr. Powell). Those who honestly face these problems cannot dodge that fact, and that applies to the right hon. and learned Member for Hexham (Mr. Rippon) more than to any other Member of the House.
Despite that, we have to see how we can conduct a rescue and provide safeguards. The abolition or alteration of the Act is the fundamental remedy for the disease, but I cannot promise that in the near future we shall be able to achieve that method of solving the problem. The Government and the House, over quite a long period, have been seeking remedies to ease the problem and the House owes a debt to the Scrutiny Committee and its Chairman for the way in which they have sought to assist us in this purpose.
In some respects the situation has been alleviated. I do not accept the whole picture presented by my hon. Friend the Member for Newham, South (Mr. Spearing). His view does not accord with paragraph 21 of the First Special Report from the Scrutiny Committee, which I shall read:
It might appear from the figures quoted in the preceding paragraph—
which referred to the number of debates that had been provided—

for debates not so far held that the Government had not complied with in the terms of the undertaking first given on 2 May 1974, to the effect that debates should take place before a final decision on Commission proposals is taken in the Council of Ministers. Save in one instance, this is not the position. The Government have kept to the strict terms of the undertaking given when the first Select Committee was appointed—a fact which the present Committee are pleased to acknowledge.
That is confirmed by the Written Answer that I gave in response to my hon. Friend the Member for Newham, South, reported in the Official Report of 14th April 1976. Details are there set out of Community legislation and Community resolutions which have been brought before the House, not solely in the form of a take-note motion. Many more detailed motions have been presented to the House. The House has had a considerable surveillance over what has occurred, although I acknowledge that it is an imperfect surveillance.
The imperfection of that surveillance is also indicated by the representations for improvements that have been made by the right hon. Member for Knutsford (Mr. Davies), the Scrutiny Committee and others. Some of those suggested improvements were set out in the debate on 3rd November. I have read every word of that debate and I agree that there are still matters presented in the debate which have to be pursued if we are to carry out the Government's undertaking.
I hope that we shall soon be able to deal with the question of the timing of debates, and provide assistance on other questions that were raised. At an early stage we shall respond to the matters left over from the 3rd November debate and the suggestions made by the Scrutiny Committee in its latest report. We shall do our best to provide assistance in that way to enable the House to carry out its duties.
Despite the muddle and the shambles described by some hon. Members, it has been a good debate. It cannot be described as a shambles. Hon. Members should not talk in those terms about debates that try to solve these problems. I know that there have been difficulties over skimmed milk and New Zealand. Only in these two cases and an earlier case mentioned by the Committee does the system appear to have broken down.


That is not a large number of breakdowns. We can learn from them and avoid them in the future.
I am not trying to minimise the difficulties. Some of them were raised by the right hon. Member for Down, South on Monday and in tonight's debate. He referred to the way in which our opportunities for intervening, to give the House a say on these issues, are affected by the way in which the Community conducts its business, which appears to be altering. Those alterations have taken place over a number of years.
The right hon. Member for Down, South suggested on Monday that the Council could not approve a regulation without a proposal from the Commission, and that that must involve a two-stage procedure to allow for discussion by Parliament. He said that those two stages have been dove-tailed. It is true that some time is needed before a regulation is published, but the commitment is made by the Government at the time of the Council of Ministers' procedure.
The right hon. Member for Down, South said that that was not illegal but that any alteration made it more difficult for intervention by the House at a time that would enable it to express its view. Anyone who looks at the subject fairly must acknowledge that the Committee has succeeded in helping the House out of some of its difficulties, but that does not alter the fact that other difficulties remain. People can see how difficult it is for the House to intervene at the proper time, even if the Government do all they can—which they do—to ensure that we get the right information and debates at the earliest possible time.
It is difficult to give indications about debates at 3.30 p.m. All European Community legislation has to be piled on top of the normal business of the House. Until the House makes an alteration in its procedures to deal with that, we are faced with the problem of providing time. I have been in my present office only for a short time, but we have had a series of debates on the subject. We shall have to provide more time earlier, and see if we can follow up all the proposals made by the right hon.

Member for Knutsford. But even then we shall still be faced with the inherent dilemma presented by my hon. Friend the Member for Southampton, Test and the right hon. Member for Down, South.
That inherent difficulty, according to the right hon. Member for Down, South, would not even be solved by the resolution proposed by my right hon. Friend the Member for Battersea, North (Mr. Jay). The right hon. Gentleman said that he would support the resolution in order to illustrate the difficulties of the situation and to assist the education of the House, the country and the universe at large. But that is not necessarily a reason that would commend itself to the Government for immediately accepting the resolution proposed by my right hon. Friend. I cannot give him the easy answer that he would like.
I undertake to report to my colleagues in the Government what has been proposed and what has been said in the debate. I shall report faithfully that there is a general will among hon. Members who have different views about the wisdom of our entry into the Market to see whether we can solve this problem. If I were a faithful reporter, I should have to report to them that the right hon. Member for Down, South does not believe that the remedies so far offered are likely to be successful. How that will weigh with them only a better mind-reader than I could divulge.

Mr. Jay: The reason why I proposed the resolution was not precisely that given by the right hon. Member for Down, South (Mr. Powell). I thought that it would at least improve the situation if we put in more precise form the undertakings that the Government are supposed to have given.

Mr. Foot: I shall not go into the question of the undertakings given by my right hon. Friends because I have only three minutes left, but those undertakings cover the general situation, and it is the Government's desire that there should be debates on the matter in time to affect the situation. A resolution of the nature proposed by my right hon. Friend would be much more exact, precise and far-reaching.

Mr. Jay: Hear, hear.

Mr. Foot: I appreciate that that is why my right hon. Friend proposed it.
Such a resolution would also conflict with the proposition put, with complete candour, by my right hon. Friend the Minister of Agriculture, Fisheries and Food when replying to Questions today. He said that he would not give undertakings in advance because he must protect his negotiating position. I am sure that he has said that to the Scrutiny Committee on other occasions. That might conflict with a precisely-worded resolution. That is the dilemma. It is no good thinking that the dilemma can be made not to exist merely by passing the resolution suggested by my right hon. Friend. That would create further difficulties.

Mr. Peyton: I think the right hon. Gentleman's approach to the matter very agreeable, but I hope that, having discussed the matter with his colleagues, he will undertake to put some proposals before the House before the Summer Recess.

Mr. Foot: I have only half a minute left. Some may think that that is advantageous. I might talk myself out in reply, but if I did the right hon. Gentleman might be flattered that his question was too difficult for me, and I do not think that it is. Of course I believe that we must make further progress with the matter before the Summer Recess. A response must be made to the right hon. Gentleman—

It being three hours after the motion had been entered upon, the motion for the Adjournment of the House lapsed, without Question put.

HOUSING (EDINBURGH)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Harper.]

1.14 a.m.

Mr. Robin F. Cook: I make no apology for raising, even at this late hour, a matter of limited interest to those outside my constituency. It is, however, a matter of the greatest importance to a large number of my constituents.

It is customary for those who have held a relevant post to declare an interest before the commencement of the debate, and I suppose that it is only right that I should declare an interest in that I formerly held the post, unpaid, of chairman of the Edinburgh housing committee. That is partly why I raise the matter, because I have been especially pained over the last year to see so much of what had been done in the previous two years by the Edinburgh Council undone in the first year of the Edinburgh District Council. If the measures we had put in hand in the two years before had been allowed to come to fruition I believe that we would have been well on the way to having a revived community in the centre of the city. As it is, they have not been allowed to carry through to fruition because, since May 1975, the control of housing policy has been under the Conservative group that dominates Edinburgh District Council—a group that appears to have taken the view that the less it does about housing in the city, the happier it will be.
I want to draw the Minister's attention to the distress that this has caused in my constituency and urge on him to put whatever pressure he can on the local authority to reverse this disastrous trend, which can lead only to the extinction of the city centre as a living community and residential area. As the Minister knows, the principal decision of the Conservative group on the housing committee in Edinburgh has been to restrict expenditure on housing well below the amount for which the Government are prepared to grant loan sanction.
This has affected the programme of modernisation of council houses. As the Minister is aware, from an answer to me two or three months ago, Edinburgh is spending only £1 million on modernisation, although the Government are prepared to give borrowing consent for £4 million. This leads to the interesting contrast that while Edinburgh is spending £1 million, Glasgow—this will warm the Minister's heart—is spending £25 million, and even Motherwell is spending £3 million. It is a ludicrous situation that a town one-sixth the size of Edinburgh is spending three times Edinburgh's budget on council house modernisation.
That has a bearing on many of my constituents, because most of the council


houses in my constituency are pre-war council houses. I wish the Minister to concentrate his mind on Tron Square, a council block built not just before the last War but before the First World War. It is a square of three blocks, one of which has been entirely emptied of tenants in preparation for modernisation, which it seriously needs. Since Edinburgh's voluntary cut-back in its housing budget, there has been only a token amount left for this modernisation work, which means that work will start only in the final months of this financial year. That means that the block will stand empty, in an area with the most acute housing shortage, simply because the council is not prepared to borrow the money for which it has consent. The scandal is made worse by the fact that when the council gets round to carrying out the work, because of vandalism to the property meanwhile the eventual cost will be higher.
I ask my hon. Friend to draw the attention of the authority to the fact that it is not taking up the full amount of loan allocated to it, and to express concern that we have council property empty, not because plans are lacking, or because of doubt about the ability to be relet after modernisation, but simply because the authority is not prepared to take up borrowing consent.
I also draw the Minister's attention to the way that this has reduced such new building as might be going on. The number of sites in the city centre is limited, as I would be the first to admit, but, precisely because of their limited nature, it is important that we progress with the sites available to us. I draw my hon. Friend's attention to the site at Lauriston Place, at Tollcross. I mention it with personal pride, because it was the first site we obtained for council house building on land rescued from the road programme.
That was three years ago. Three years later no building has started on the site. I was appalled to learn recently from Labour councillors on the housing committee that the Conservative group deleted the budget provision for the design and planning costs of the site, so that there will be a further unnecessary delay on the site.
If the houses went ahead I accept that they would make only a limited contribu-

tion to the housing shortage in the city, and only a limited contribution to the shortage even in Central Edinburgh. But the provision of housing on that site would be important not just in itself; it would be important because it would provide encouragement to the local people, giving them hope that their area had a future.
As it is, the people of Tollcross, instead of seeing new building going on, will daily have to pass an enormous hole in the ground, surrounded by a very ugly barricade and dominated by the torn, unfinished mutual gable end that sticks out over the site.
I invite the Minister to give me an assurance that this project, or a similar one, will not be held up because of any reluctance on the part of SDD to grant the borrowing facilities necessary to progress the design and architectural fees.
I ask the Minister also to express his concern that here we have a prime central site allowed to lie empty and sterile because the local authority appears reluctant to undertake the necessary expenditure.
I wish now to turn to the question of older property within my constituency—property that is affected by action under the Housing Acts. The two types of property are intimately connected, for so long as the owner-occupiers in the older property see that the corporation is not modernising its own houses, and so long as they see the corporation failing to carry out any new building on the sites open to it, owner-occupiers will naturally be reluctant and lack encouragement to invest money in modernising and repairing their own property.
I now have four or five housing action areas within my constituency earmarked for improvement. I appreciate that these are being dealt with under new legislation, and that every local authority is necessarily feeling its way in operating this legislation, but I have been deeply disturbed by the comments expressed to me by both constituents and community organisations from these areas. The field of complaints is very wide, but I shall concentrate on two particular areas of complaint to draw the Minister's attention to them.
First, there are repeated complaints about lack of information from the local authority. My hon. Friend will have


seen the paper presented to his office by the residents of Downfield Place, in which they point out that, in Circular 67 from his Department, local authorities are advised to provide an explanatory note with the draft resolution that they send to every resident. That was not done in this case. The ordinary resident was left grappling with the legal terms. The ordinary resident has been informed that his house is to be brought up to a specified standard, but he has not been advised what it is. He has been advised that some residents will be entitled to 90 per cent. improvement grants. He has not been advised which type of resident will be entitled to that amount of grant.
It would appear that the local authority is deliberately relying on local associations carrying out its communication and explanatory work for it. It is a mercy, a piece of good fortune, that every housing action area in my constituency is now covered by a very active residents' association. Each of these is doing its best to contain the situation. But, in all honesty, it is surely grossly unfair to expect the voluntary officers in their spare time to carry out the essential work of communicating information to the residents and co-ordinating the work on mutual repairs.
I again ask the Minister whether he will consider the issue of a further circular on this matter, couched in stronger terms than Circular 67 and emphasising the need for local authorities to take an active rôle in communicating the meaning of the housing 
action area order.
The second major area of complaint from the housing action areas is the decision of the local authority neither to rehouse nor to decant those affected by improvement work. I must tell my hon. Friend that this is causing considerable distress to many residents in the housing action areas.
I refer to a surgery that I held only last week, in which two residents from a housing action area came to see me. The first was a single person of 75, elderly and largely housebound. The second was a woman who lives with her husband in a room and kitchen in a housing action area. The husband is entirely bedridden. Both these households are living in very small properties. Both are facing con-

version work which involves the installation of a bathroom and, conceivably, the removal of an internal wall. It strikes me as most unreasonble to expect people of this age and in this kind of situation to live through such improvement works.
I suspect that the local authority is sailing fairly close to the wind in, possibly, failing to carry out a statutory duty to offer rehousing to residents affected by a housing action area order. The 1974 Act is not explicit on this matter, but I note that the draft resolution which the local authority passes in these cases, a copy of which is sent to residents, contains these words:
The local authority resolves to recommend houses for rehousing of persons to be displaced in consequence of action following the draft resolution.
Therefore, I ask my hon. Friend whether he can give some guidance on the statutory obligation resting on local authorities in this matter, and whether he will be prepared to issue guidelines on the policy he would consider most suitable on rehousing from housing action areas.
I want before concluding to say a few words to express my concern about the role of the Housing Corporation in Edinburgh. I mention it primarily because of the intimate link that has been forged between the Edinburgh office of the Corporation and the Conservative group on the Edinburgh District Council.
As I understand it, the housing committee has granted about one-third of its future rehabilitation programme for action by housing associations. However, when it took that decision, it did not designate which associations should undertake the work. As far as I am able to gather, this was settled at a subsequent private meeting between Councillor Waugh, the chairman of the housing committee, and the Edinburgh staff of the Housing Corporation. At that meeting, it was agreed that only four housing associations in the city would be allowed to participate in this work. It is curious that of those four associations, one is chaired by Councilor Waugh and another by Councillor Drummond-Young, who might be described as the eminence grise of the housing committee. None of the four housing associations involved has any genuine roots in the community organisations in the areas where they operate. What is worse, the existence of


these four associations and the monopoly rights that they have been given over their areas has precluded housing associations based on the local residents' associations from gaining recognition.
I refer my hon. Friend to the struggles of the South Side Association in my constituency. This is a respected organisation, which has existed in the area for some years and has done considerable community work. For nearly 12 months, it has been striving to obtain recognition and registration of a housing association by the Housing Corporation. Consistently, it has been refused. Happily, it appears at last to have achieved a suitable and satisfactory arrangement with the local housing association, which has been approved by the Housing Corporation. But I cannot understand why we resist rather than encourage housing associations based on such residents' groups.
Another curious fact is that the arrangement which Councillor Waugh has come to with the Housing Corporation in Edinburgh appears to give him even more autocratic power over its decisions than that which he exercises in the housing committee. I refer my hon. Friend to a letter passed to me by the South Side Association, which it received from the Housing Corporation. In the course of it, the Edinburgh officer of the Housing Corporation refers to an application from a housing association in Leith that was not successful in obtaining registration. In his letter, the officer says:
…the question of the 'Registration' of an additional Association for Leith did not arise as the Edinburgh District Housing Cons crier's negative view was made know as soon as the idea of an additional Association saw the light of day and it was not therefore pursued.

Mr. Andrew Welsh: Have they offered any explanation whatever for the decision on the association. or the criteria used in reaching that decision?

Mr. Cook: I have been unable to obtain an adequate explanation. The comment made by the officers of the Housing Corporation is that they have to work with the four housing associations that have been approved by the local authority, and they are interpreting Councillor Waugh as representing the authority. It is not my reading of the

1974 Act that the Housing Corporation is limited to recognising only those associations that have the blessing of the local authority. The whole rhetoric of the debates on the 1974 Act was that we were providing a means whereby there was an alternative form of housing provision to that of the local authority.
It would appear that the Housing Corporation has allowed Councillor Waugh to exercise an absolute veto on the application from a community-based housing association. The particular irony of this case is that the application came from an association which is active in Leith, and Councillor Waugh is the chairman of the existing association in Leith. It strikes me as strange that a semi-Government organisation has allowed a political figure to exercise a veto in this fashion.
I ask the Minister for an assurance that it is Government policy that housing associations should, wherever possible, have genuine roots in the community in which they work. Will he discuss this matter with the Edinburgh office of the Housing Corporation?
I realise that, in the first instance, most of these issues are matters for the local authority, but they vitally affect my constituents, perhaps more directly and profoundly than many decisions taken in this Chamber. It is therefore proper that we should consider them. I should be most grateful for any steps that the Minister could take to encourage a more positive attitude to them on the part of the local authority and the Housing Corporation.

1.33 a.m.

The Under-Secretary of State for Scotland (Mr. Hugh D. Brown): I have listened with great interest to the eloquent attack that my hon. Friend has made on what he regards as the failures and errors of Edinburgh District Council's housing policies. I know he speaks on this subject with great authority, arising from his own experience as the housing convenor. I am sure that Edinburgh District Council will read his remarks with interest, and I hope it will profit from them.
As my hon. Friend recognises, most of the matters of which he speaks are matters for the local authority and not for me. I am afraid that I have to


resist the temptation to criticise the Edinburgh District Council. It is hard to resist it, but nevertheless it would be unwise for to criticise it, considering the relationship that we have tried to build up by giving local authorities freedom in matters such as rents. The relationship between central and local government is always delicate. We do not like to be accused of instructing anyone where there is no default in the exercise of statutory powers.
My hon. Friend has made many valid points. I shall deal with some of them, and read everything that he has said.
I gave specific figures on capital investment. There is a system of allocation, and for 1976–77 Edinburgh could have had £4·7 million. In fact it asked for only £1 million. I did not like the way my hon. Friend said "even Motherwell", because Motherwell is quite a good authority in this regard. I am concerned about it, but it is not part of my job to encourage any authority to spend more money. I make the point now, and I have made it publicly, but not as a public criticism, that if Edinburgh does not want the money there are many other authorities that are able, willing and competent to use it. My hon. Friend was right to draw attention to this matter.
I am also concerned about the new housing programme. I do not have time to go into the qualifications. There is no restriction on the building of new houses, in terms of the financial resources. The length of the waiting list is a factor to be taken into account, but it is not the only criterion, and no authority—certainly not Edinburgh—can say that we are holding back resources that could be used for a programme of new houses.
I thought that my hon. Friend was a little unfair in his reference to Lauriston Place. Our information is that there has been difficulty in acquiring the site. The compulsory purchase order procedure may be invoked, and that may be the reason for the delay. I cannot comment further on that, because it is for my right hon. Friend to adjudicate on the matter. It may be that the district council has some knowledge that there will be some delay, but if so, I am not privy to it. It may be that the procedure to be gone

through is the reason for the delay. I am being very charitable when I say that that may be the reason why the council has taken this out of its programme of design work. I assure my hon. Friend that it is not the Department that is holding things up, and if further inquiries would be helpful I am willing to make them.
My hon. Friend referred to housing action areas. As I have made one or two implied criticisms, it is only fair to say that the two authorities that are doing the most work in this field are Edinburgh and Glasgow. It would be unfair not to recognise that. Out of the 78 housing action areas so far declared in Scotland, 13 are in Edinburgh, and of the 3,254 houses included in such areas for improvement, 1,074 are in Edinburgh. This is welcome, and shows that the district council is beginning to tackle this difficult problem. Nevertheless, there are still problems, and I think it has to be appreciated that we have changed the policy for improvement grants. We are making them at a much higher level in housing action areas, and we are being more selective, rather than using the rather generous provisions—one might almost say the mis-use of resources—for which the Conservative Government were responsible.
My hon. Friend raised one or two fundamental points about housing associations and he related these to Downfield Place. I am aware of the difficulties and the submission made by the residents' association. It seems to me—and I have some experience of this kind of thing—that there has been a lack of sensitivity on the part of the district council, coupled with perhaps a little bit of aggression on the part of the local association which has resulted in an attitude with which I am familiar in my constituency. It would be a pity if what is basically a sound concept were spoiled because of the lack of information. I could not agree that the district council has failed in its statutory duty or to comply with the circular, and I do not think a further circular is necessary.
In the general context, I am most concerned that there should be the maximum amount of co-operation between local associations and the individuals concerned when this procedure is adopted.


It may well be that we have lessons to learn, or that we can benefit from the experience of Edinburgh and the residents' association in ways that may be useful to other authorities who want to take advantage of the provisions for housing action areas.
My hon. Friend also said that there might be a failure of statutory duty in terms of the lack of decanting facilities. I question that, but in a spirit of cooperation with Edinburgh District Council, if there is any specific case I shall be interested to hear the details. If there is a doubt in the mind of my hon. Friend it is only fair that it should be cleared up, because there is a responsibility to ensure that the circular and the law are specific.

Mr. Welsh: Will the Minister take up the point concerning information between the housing authority and individual tenants? Lack of information about housing action areas can cause great distress to those involved.

Mr. Brown: I have already given an assurance that I would regret it if there were undue concern in the mind of any individual because of a lack of information. We have had long discussions about the way in which a housing authority should communicate information. There is a legal requirement, but legal jargon is sometimes both unintelligible and frightening to ordinary people. I

should deplore it if any authority were so insensitive as merely to go by the book, without injecting some humanity into its dealings with people. I do not suggest that that is what happened in this case.
I have no knowledge of the South Side Association. The recognition of housing associations is entirely a matter for the Housing Corporation, but in the general context of the problem—because fairly generous resources are being made available to the Housing Corporation and, therefore, to housing associations—I sometimes feel that the Government do not get enough credit.
If some of my hon. Friend's experiences are flinging up doubts about the relationship between the parties concerned, or about the problem of recognition, without wishing to criticise Edinburgh District Council I shall be very willing to hear about them and to discuss them with the Housing Corporation.
I hope that I have answered all my hon. Friend's questions. I am indebted to him for raising this constituency matter, which is nevertheless important to Edinburgh as a whole and to many of its citizens. Because housing policy is a matter of interest and concern to me, I shall be very ready to help within the limits of my responsibility.

Question put and agreed to.

Adjourned accordingly at seventeen minutes to Two o'clock.

Second Reading Committee

Wednesday 19th May 1976

The Committee consisted of the following Members:


Sir Thomas Williams (in the Chair)


Atkinson, Mr. Norman (Tottenham)
Neubert, Mr. Michael (Romford)


Berry, Mr. Anthony (Southgate)
Renton, Mr. Tim (Mid-Sussex)


Davidson, Mr. Arthur (Parliamentary Secretary, Law Officers' Department)
Rhys Williams, Sir Brandon (Kensington)


Davis, Mr. Clinton (Under-Secretary of State for Trade)
Sedgemore, Mr. Brian (Luton, West)


Ford, Mr. Ben (Bradford, North)
Shersby, Mr. Michael (Uxbridge)


Higgins, Mr. Terence (Worthing)
White, Mr. Frank R. (Bury and Radcliffe)


Lamond, Mr. James (Oldham, East)
Wigley, Mr. Dafydd (Caernarvon)


Loveridge, Mr. John (Upminister)
Woodall, Mr. Alec (Hemsworth)



Mrs. de Ste. Croix, Committee Clerk.

COMPANIES (No. 2) BILL [Lords]

10·30 a.m.

Resolved,
That if the proceedings on the Companies (No. 2) Bill [Lords] are not completed at this day's sitting the Committee do meet on Wednesday next at half-past Ten o'clock.—[Mr. Clinton Davis.]

The Under-Secretary of State for Trade (Mr. Clinton Davis): I beg to move,
That the Chairman do now report to the House that the Committee recommend that the Companies (No. 2) Bill [Lords] ought to be read a Second time.
I do not intend to speak at unnecessary length—at length but not unnecessary length. I do not think that I am required to devote a great deal of time to the technical details of the Bill, because it was considered in detail in another place on Second Reading and then during its Committee and Report stages just a few weeks ago. Furthermore, I remember, also just a few weeks ago, only too well the rebuke directed at me by the hon. Member for Worthing (Mr. Higgins) when

we were considering the Second Reading of the Insolvency Bill, when I made the unforgivable assumption that some members on the Committee might not have read the record of the proceedings in their Lordships' House. I must not repeat that error. However, I want to say something about some of the points—mainly of a technical nature—which have given rise to comment during discussions on the Bill so far. But we shall have more time to explore these in Committee.
I do not believe that the Bill can possibly be regarded as politically contentious. It is going through a Second Reading Committee procedure, which gives some indication of that fact. But, since it is largely a technical Bill, it is right that I should say that, if it is felt that the Bill requires some improvement in this technical sense, the Government would be happy to listen carefully to any observations made in that respect and to seek to improve the Bill. We are involved


in further discussions with some of the professional organisations, which are designed to achieve that objective, although those that have taken place already have been of a detailed character.
Before I turn to the Bill itself, I think it would be appropriate if I were to outline the Government's approach to the reform of company law as a whole. [HON. MEMBERS: "Hear, hear."] I am delighted that I carry the whole of the Committee with me on that. Hon. Members must not object, therefore, if I take a little time on it.
As hon. Members will be aware, we inherited from our predecessors a Companies Bill which had been introduced shortly before the election in February 1974. While the clauses of that Bill, containing provisions tidying up the administration of companies, were broadly acceptable to all parties, those dealing with fundamental areas of company law, such as the rôle and responsibility of directors, reflected attitudes which the Government felt were no longer in keeping with contemporary developments and requirements.
The basic principles underlying British company law were established more than 100 years ago. At that time the emphasis was entirely on the protection of the providers of capital—the shareholders and creditors. There have been enormous social and economic changes over the past century, but, in the Act of 1948, still in force today, that emphasis remains: the interests of employees and of the wider public are in no way recognised in that Act. Of course, in practice, most companies should take account of their responsibilities towards employees, consumers and the public interest, and many do, but company law does not require them to do so.

Mr. Tim Renton: I am somewhat surprised at what the Under-Secretary has said—that the 1973 Companies Bill did not reflect contemporary attitudes. He will doubtless remember that Clause 53 of that Bill specifically and for the first time laid on the directors the duty to have regard to the interests of the company's employees generally as well as of its members. Surely that was a recognition of the change in contemporary altitudes.

Mr. Davis: There was some recognition of it, but it was wholly inadequate. It still reflected a view which was traditional and not in keeping with modern requirements. The substantial review of worker participation in industry on which we have embarked through the Bullock Committee will substantiate the charge that I have made about the 1973 Bill. I do not expect to carry the hon. Member for Mid-Sussex (Mr. Renton) with me on that, because he is still antediluvian in his thinking, but I hope to carry my hon. Friends with me.
The Companies Act 1967 took a few tentative steps in the direction of acknowledging companies' wider responsibilities by requiring companies to disclose a wider range of information. But this is no longer sufficient. Company law is by now long overdue for fundamental reform and, indeed, for a fundamental change in emphasis. That is why the 1973 Companies Bill—concerned, as I still assert that it was, almost exclusively with the interests of shareholders and creditors —was inadequate. The provision to which the hon. Gentleman referred was in itself insufficient to have regard to the fundamental changes which are required. I am surprised that he should have made that rather glib assertion.

Mr. Renton: I do not know whether the Under-Secretary is trying to stir up controversy on what I thought and hoped would be a non-controversial Bill, but it would be helpful if he could be more specific. I take it from what he is saying that he has not read Clause 53 of the 1973 Bill, or has not read it for a long time. It explicitly provides that the matters to which directors of the company are entitled to have regard, in exercising their powers
shall include the interests of the company's employees".
That cannot be said in any way to base the duties of directors solely towards shareholders or creditors. It was regarded at the time as a substantial step forward in the drafting of company law, and it is a matter of great regret to us that there is no such provision in this Bill.

The Chairman: It is extremely dangerous to intervene in conflict between hon. Members, but I wonder whether we might spend more time discussing the 1976 Bill than the 1973 Bill.


The hon. Gentleman should not be provoked too easily or quickly.

Mr. Davis: I am very much obliged for your intervention, Sir Tom, although I was about to say—and I shall say, if you will permit me—that the 1973 Bill was permissive. The hon. Gentleman has underlined that. "Are entitled to have regard" does not mean that they are required to have regard. That is the essential point. It was a tepid and tentative approach.
Be that as it may, it is abundantly plain that we are in need of fundamental reform. That is the point I was seeking to assert before I unintentionally provoked the hon. Member for Mid-Sussex who has a very low boiling point. It is for this reason that we decided that we would embark, very shortly after coming into office, on a wide-ranging review of the complete area of company law. It was inevitable that a major exercise of this depth would take a considerable amount of time. It is clearly essential that we should not embark upon reforms affecting the basic legal framework, within which the whole of the private sector operates, without the most profound and thorough examination of all the issues.
As I have already said, the manner in which companies are run has changed considerably in recent years. At long last, there is a growing recognition that the contribution made by employees is at least as important as that made by the providers of capital. After all, employees invest their most precious asset —their working lives. By ensuring that employees are fully informed about the company's affairs, by consulting them and by involving them in decision-making, companies can benefit not only employees, but themselves. The Government are committed to a radical extension of industrial democracy in both the public and private sectors because we believe that this is one of the most significant ways in which this country's full potential can be achieved and, indeed that it will represent a buttress to parliamentary democracy.
The first steps have already been taken. The next stage is the introduction of employee representation on company boards. An extension of industrial democracy along these lines must have pro-

found implications for company law. It brings into question such basic principles as the responsibilities and duties of directors, the need for wider and more meaningful disclosure of information without which effective participation and consultation can be negated, as indeed can the objectives of companies themselves. It must inevitably lead to major changes in the law and in the way industry is managed.
The task of recommending the best means of bringing about such an extension has, therefore, been given to an independent Committee of Inquiry under the Chairmanship of Lord Bullock. The Committee has been asked to report by the end of this year, and the Government will introduce legislation as soon as possible thereafter. This legislation will impinge on so much of company law that there is only a limited range of matters which it is reasonable to deal with in advance of it.
The other major area, in which the Government could not adopt the views of our predecessors without further study, was the arrangements for supervision of the securities market. The Government have consulted interested organisations in the City and elsewhere and are still considering the views they have expressed. They have not yet come to a final decision as to the extent to which there is a need for tighter statutory control of City activities. Those favouring a self-regulatory system argue its advantages, its flexibility and speed of response. Others argue for some form of independent supervisory authority, perhaps on the lines of the Securities and Exchange Commission in the United States. There are still others, even in the City, who feel that there is room for some new combination of statutory and self-regulatory supervision. Suffice it to say, at this stage, that the Government are concerned about the absence of public accountability in the existing system of supervision and we shall consult fully and consider with care all the options which have been advanced.
More specifically it is now generally agreed that insider dealing should be made a criminal offence. The 1973 Companies Bill attempted to deal with this question, but the Government and a wide body of professional opinion did not consider that the provisions of that Bill were


adequate. We have therefore been studying insider dealing, together with warehousing and other abuses arising from the use of nominees. We intend to include methods to deal with these matters in legislation on the securities market.
Since 1973, there have been several developments which need to be taken into account in any major new companies legislation. Recent inspectors' reports have revealed abuses which must be dealt with. One of the most serious problems concerns directors who, by various dubious means, line their own pockets at the expense of the shareholders. We are giving particular attention to measures to prevent such malpractices in the course of our review by company law. Inspectors' reports have also revealed widespread breaches of Section 54 of the Companies Act 1948 which makes it illegal for a company to provide financial assistance for the purchase of its own shares. We accept that the section needs strengthening and that, in particular, the derisory fine of £100 must be increased. Consideration is being given to this.
Similarly, a number of other lessons from inspectors' reports are being studied, and proposals to meet them will be brought forward in due course.
We are involved, too, in the negotiations for harmonisation of company law in the EEC. I do not think it is necessary for me to pursue this further now. It is likely that the House will be given an opportunity in the not too distant future to consider the second, third, fourth, fifth and sixth directives. But, obviously, having just mentioned them, it goes without saying that these are matters which are bound to have considerable effect on companies legislation.
For all these reasons, I see the next few years as being the greatest period of radical reform in company law in the history of this country. [Laughter.] The hon. Member for Mid-Sussex seems to be highly amused by that. Does he not consider that legislation on industrial democracy will have a profound and radical effect on our thinking in company law? Does he not consider that the harmonisation proposals of the EEC will have a radical effect? The hon. Gentleman is entitled to be amused. But I think that the contribution that has

been made by the Conservative Party as far as this thinking is concerned has been —I used the word "tentative" before, and I think that is perhaps a modest way to put it.

Mr. Terence Higgins: I think it is not quite as tentative as the Government announcing that they are to make a statement on industrial democracy at 2.30 in the afternoon and failing to make it at

3.30 p.m.

Mr. Davis: The fact is that the Bullock Committee has been set up. The Bullock Committee is hard at work considering evidence from a widespread area of both sides of industry, and we hope that it will be in a position to makes its report by the end of this year. That is significant and important progress, and I would have hoped that the hon. Gentleman would not have approached the matter as pedantically as he has done.
There are, however, a number of urgent matters, mainly of a technical nature, which should not be left until the various other inquiries have been completed. It is these matters, none of which impinges upon the subject matter of those inquiries, with which this Bill is concerned. I do not deny that the aim of the Bill is limited. It is not a major reforming measure. It is, intentionally, only an interim measure dealing with a number of particular problems and abuses which all parties are agreed should be tackled as rapidly as possible.
The provisions have been the subject of intensive consultation and have been widely welcomed as a useful first step towards the improvement of company law.
I turn now from the heights of future policy to the more mundane provisions of the Bill. I should like first to summarise briefly its objectives.

Mr. Tim Renton: Before the hon. Gentleman turns from the heights of future policy, could he tell us about the future course of legislation? Does he envisage that, once the Bullock Committee has reported, there will then be a Green Paper or a White Paper about the shape of the new major Companies Bill that he proposes should be introduced and, if this is the case—and it would seem to be necessary that there must be a Green or a White Paper following the Bullock Committee—does he really


believe that he will be able to introduce a major companies Bill in the 1976–77 Session.

Mr. Davis: I think we shall be able to introduce the Bill. It is important that there should be the widest consultation. We have not decided yet whether we shall introduce a Green Paper or a White Paper. We must look at the conclusions of the Bullock Committee first and arrive at a decision about that. I undertake that the Government will provide every reasonable opportunity for full consultation about the provisions of this most important measure. It may be that the publication of the Bill is an option that the Government would choose, so that there might be discussions about the drafting of the terms of the Bill, as has happened to a number of other Bills in Parliament.
I should have thought that the course that we will follow will be as I have outlined. A securities Bill is likely to be a separate measure. As a third measure, I should like to see a traditional Companies Bill embracing a number of the issues that I have mentioned this morning, and dealing with the residue in the light of the substantial changes that will have been brought about primarily as a result of the Bullock Committee's considerations of industrial democracy.
I turn to the provisions of this Bill, perhaps net before time. I want briefly to summarise its objectives. First, we want to tighten up the requirements about the filing of companies' accounts and the keeping of accounting records. The second objective is to strengthen the position of auditors. The third objective is to give the Secretary of State power to prevent a foreign company with a place of business in Great Britain from trading here under a misleading name. Fourthly, the objective of the Bill is to deal with certain other matters concerning Companies House.
This Government, and its predecessor, have been concerned for several years by the failure of very large numbers of companies to file on time their annual returns and the accounts which should accompany them. Out of some 643,000 companies on the register, 186,000 are known to be in default to some degree in filing annual returns. This situation cannot be attributed to any lack of diligence by the Registrar of Companies and

his staff, who make strenuous efforts to pursue companies in default. Reminders are currently sent out at a rate of some 10,000 per week and last year summonses were served on 2,440 directors of 989 companies in default. In addition, 28,000 companies were struck off the register in 1975 because they failed to respond to reminders and were presumed to be no longer in business. Despite these efforts, it is virtually impossible for the Registrar to ensure the prompt filing of accounts because of defects in the present law.
There are two main problems. First, the obligation to file accounts arises only after the accounts have been laid before the company. As the Registrar does not know whether accounts have been so laid, he does not know when accounts should have been filed with him. Second, the present provisions allow the latest accounts on file with the Registrar in extreme cases to relate to events over three years old. I think that the Committee would agree that that is quite unacceptable. Public disclosure of accounts is the price which companies are required to pay in exchange for the privilege of limited liability. Those dealing with companies are entitled to up-to-date information about their financial state. This has been the underlying principle of the limited liability concept from the beginning, and the system cannot be regarded as functioning properly if reasonably up-to-date accounts are so often not available.
The Bill will remedy this situation by creating a specific obligation to file a copy of the accounts within a fixed period after the end of the company's accounting reference period, or financial year. In future the Registrar will be notified of each company's accounting reference period and companies will have to file accounts within 10 months of the end of their financial year, in the case of private companies, or within seven months for public companies.
So as to underline the importance of prompt filing of accounts and to provide an incentive to companies and their directors to comply with their obligations, the penalties are substantially increased. Every director who fails to take all reasonable steps to ensure that accounts are filed on time will be liable to a fine of £400 plus £40 for each day of default, and the company will be liable


to a civil penalty which will increase with the length of default up to a maximum of £450. Clauses 1 to 8 apply these provisions to companies registered in this country and Clauses 9 to 11 apply similar provisions to foreign companies having a place of business here.
Perhaps I might mention one aspect of the new provisions in a little more detail. Clause 3 provides for the alteration of a company's accounting reference period. The drafting of this clause has been criticised for being unduly restrictive, especially in relation to a company which needed to bring its financial year into line with that of other companies in the same group. We have accepted this view and the clause has now been amended so as to facilitate the alignment of the financial years of a holding company and a subsidiary by permitting the retrospective alteration of a previous accounting reference period for this purpose, and by allowing an extension of a reference period to be made even though this would not normally be permitted as there has already been an extension within the preceding five years. This gives an indication of the fact that we are prepared to listen to representations of this kind which may be made to us and take action upon them.
The new provisions as to the filing of accounts will enable the Registrar to pursue defaulting companies much more promptly and more effectively, but I must tell the Committee that some additional staff will be required to administer these matters. It is estimated that there will be a net increase of about 60 staff at a cost of about £150,000 per year. This increase has been rigorously examined in the light of the need to make cuts in public expenditure and manpower, but we have concluded that prompt disclosure of accounts is of such importance as to justify the staff increase.
As the introduction of the new arrangements will involve a great deal of work for the Registrar and his staff, it cannot be undertaken until next year when the move to Cardiff has been completed. The first stage of the move has already been successfully accomplished, but it will be some months before the new office will be in full operation and the staff concerned will be able to concentrate on the new filing arrangements.
It is, of course, essential that companies should keep adequate records to enable the directors to ascertain the financial position of the company at any time and to show the transactions in which it has engaged. It is from these records that accounts are derived. The unforeseen financial difficulties, which many companies have run into, partly as a result of inadequate internal accounting systems, underline the need for companies to maintain proper records.
Clause 12 of the Bill clarifies and strengthens the requirements as to the keeping of accounting records and provides that such records must be preserved for at least six years. Some doubts have been expressed about whether the wording of the clause makes it clear that accounting records must be kept up to date. That is certainly the Government's intention and we believe that this intention is achieved by the clause. We are considering whether the requirement should be made more explicit.
Clauses 13 to 17 of the Bill are concerned with auditors and in many ways represent the most important feature of the Bill. It is naturally important to ensure not only that accounts are available promptly to shareholders and the public but that they give an accurate picture of the state of the company's affairs. The Bill strengthens the position of the auditors and ensures that they have the necessary rights and powers to carry out their functions effectively in all situations.
Clause 13 deals with the qualifications of those who audit companies' accounts. The normal qualification is membership of one of the four recognised accounting bodies. The 1948 Act also allows the Secretary of State to authorise individuals on the basis of adequate knowledge and experience. The Government consider that it is no longer appropriate that a person should become an auditor without having first passed the stringent examinations set by the recognised professional bodies. In view of the importance of maintaining high professional standards the Bill provides that, one year after Clause 13 comes into effect, no further authorisations shall be granted on the basis of adequate knowledge and experience. The one-year delay will allow a reasonably extended last chance for those seeking authorisation on that basis. At


present, auditors are normally reappointed automatically every year. With an appointment of this importance, this is not acceptable. Clause 14, therefore provides that in future auditors will have to be appointed every year by the company at its annual general meeting.
Clauses 15 and 16 are particularly important. They represent a major strengthening of the position of auditors who find evidence of malpractice or may be in dispute with the directors about the propriety of particular transactions. Clause 15 provides that if an auditor resigns at any time, he must make a statement, either setting out any circumstances connected with his resignation, which he considers should be brought to the attention of shareholders and creditors, or stating positively that there are no such circumstances.
It has been suggested that an auditor who does not seek re-appointment at an annual general meeting, or who is voted out of office by the shareholders, should be required to make a similar statement. There is, of course, much less need for a statement in these circumstances, as the auditor will normally have completed his audit and his audit report will disclose whether there is anything wrong. Nevertheless, in principle, we have some sympathy with the suggestion. There are, however, considerable practical problems. It would not be simply a question of applying the procedures in Clause 15. The different circumstances would require different procedures.
For example, Clause 15 is self-enforcing. An auditor can resign only if he makes the required statement. In the case of an auditor whose appointment has expired, it would be necessary to provide some means of enforcing a requirement to make a statement, perhaps a criminal penalty, which has not been widely welcomed by the accountants, or some form of recourse to the civil courts, which may be a more appropriate way of approaching the matter.
Overall, somewhat elaborate provisions would be necessary for what might be considered only a marginal additional safeguard. The Department is discussing this issue with the accounting bodies and we can return to it in Committee. Clause 16 enables an auditor who has resigned to requisition a meeting of the company

at which he can explain his reasons for resignation. These provisions will give the strong auditor a very effective threat in the event of a dispute with the directors and should force the weak auditor to face up to his responsibilities. No longer will an auditor be able to avoid a difficult situation by resigning silently. Simply to opt out and keep mum is clearly an unsatisfactory state of affairs for an auditor in that position.
Lastly, Clause 17 assists the auditors of holding companies to reach a properly informed view about the accounts of the holding company, by giving them the right to require the directors and auditors of subsidiaries to supply information about the accounts of those subsidiaries.
Although the Bill was published at a time when the affairs of London and County Securities were receiving considerable Press coverage, its provisions were not drafted specifically to deal with any of the accounting and auditing problems which came to light as a result of that investigation, although they are, of course relevant to several of the problems which arose in that case. The English and Scottish Institutes of Chartered Accountants have set up a committee to investigate the lessons to be learnt and the Government are keeping in close touch with the accounting bodies on this subject.
The provisions which I have described in some detail are the most important in the Bill. The rest I can, I hope, deal with rather more briefly. Clauses 18 to 20 make minor amendments to the law concerning notification to the Registrar of the names of a company's directors and secretary and the whereabouts of its registered office.
These provisions are a little more important than they at first appear. At present many companies, in particular "shelf" companies, fail to comply with the requirement to notify the Registrar of the names of their directors and the location of their registered office. In consequence there is no responsible person whom the Registrar can contact if, for example, the company fails subsequently to meet its obligations under the Companies Acts.
Clauses 18 and 20 are intended to prevent this situation occurring by providing that a company shall deliver to the


Registrar a statement of the first directors and secretary of the company and the address of its registered office when it applies for incorporation. Clause 19 deals with the all too common abuse of appointing somebody as a director or secretary without obtaining his agreement or even letting him know. Perhaps some Committees are sometimes subjected to the same sort of procedure. In future a signed agreement to act as director or secretary will have to be contained in any notice of appointment given to the Registrar.
Clause 21 provides that a person who has, through persistent default, demonstrated his complete disregard for the law may be disqualified by the court from acting as a director or taking part in the management of a company for a period of up to five years. This supplements the existing disqualification provisions in the 1948 Act, which are rarely used, and those proposed in the Insolvency Bill, which a Standing Committee has been considering and will consider again after one or two weeks. This will provide a valuable additional sanction against those who regularly fail to file their accounts. It has been suggested that there should be a public register of all disqualified persons. I am not sure whether it was the hon. Member for Worthing who made that suggestion or one of his hon. Friends. We are considering this possibility and I hope to propose an appropriate amendment at the Committee stage.

Mr. Higgins: On this Bill?

Mr. Davis: On this Bill. Clauses 22 and 23 enable the Secretary of State to prevent a foreign company, which has a place of business in this country, from doing business here under a name which he considers to be undesirable. Although the names of British companies are at present subject to control, there is nothing to prevent a foreign company using any name it likes. This can sometimes seriously mislead those dealing with it. The worst examples have been small foreign companies which, by trading under grandiose names, have suggested that they are reputable banks when in fact they are not. For example, the Grand Central Bank of Ruritania may have its head office in a side street, perhaps

off Mare Street, Hackney. I have not noticed it, but it might be there. The world does turn around Hackney. I want the Committee to know that. The clause will enable us to deal with this sort of abuse—I hope effectively.
Clauses 24 to 26 deal with minor administrative matters affecting the work of Companies House, and Clause 27 widens the Secretary of State's powers to prescribe by regulation the fees to be paid to the Registrar. The clause makes two changes: first, it enables the Registrar to charge a fee for services not statutorily prescribed but which he provides as a convenience to users, and second, it removes the existing limits on the fees payable for the inspection of documents kept by the Registrar. The latter fees were fixed at a maximum of the equivalent of 5p in 1844 and have never been raised. I hope that even the hon. Member for Mid-Sussex might consider that clearly the time has come to review them. Any new fees or increases in existing fees will, however, be subject to affirmative resolution. The remaining clauses deal with supplementary matters which I do not think I need go into.
To conclude, I repeat that, although it may appear to be a purely technical Bill, the Bill makes significant improvements in a number of important areas. The provisions have been welcomed by all those whom we have consulted. Detailed comments have been made by a number of interested organisations, in particular the accountancy bodies and the Law Society. As a result of that, as I have already indicated to the Committee, I shall propose amendments in Committee to meet some of their points.
I believe that the Bill represents a long overdue measure of reform and I commend it to the Committee.

11.10 a.m.

Mr. Terence Higgins: The Second Reading of a Bill is an occasion for discussing the principle on which it is based. That presents a problem in this case, as is clear from the speech of the Under-Secretary a few moments ago. The first part of his speech was devoted to a general discussion of the reform of company law with virtually no reference to this Bill, and the second to a detailed analysis of the clauses. The fact is that


we have a Bill which is in effect a Committee stage Bill but without a Second Reading, because it is a rather odd assortment of a number of clauses on particular points which seem to have been selected on a rather arbitrary basis.
The Under-Secretary referred to the Insolvency Bill, which I think it would not be unfair to describe as being "in limbo" while further consideration is, quite rightly, given to it. Obviously that Bill and this Bill will require consideration together, and we have something of a timing problem. There might be a case for having the Second Reading after the recess and then moving fairly rapidly to the Committee stage because, as I think is now entirely accepted by the Government, it would be wrong to run both the Committee stage of this Bill and the Committee stage of the Insolvency Bill in the same weeks.
That having been said, I think we can give a general welcome to the provisions of this Bill. My hon. Friend the Member for Mid-Sussex (Mr. Renton), if he is fortunate enough to catch your eye, Sir Tom, will have more detailed points to raise on some of the content of the Bill.
I should like to follow the Under-Secretary in making some general comments on the situation as we see it as regards the reform of company law. The problem for the Under-Secretary is that he keeps introducing "non-controversial" Bills which immediately turn out to be far more controversial than either he, or, I must confess, I had expected. He was to some extent, I thought, stirring up matters this morning when in his reference to the Bullock Committee he said that our attitude on this question of employee participation had been tentative. He even prompted me to make an intervention, which I thought was a fair one in the circumstances, that it was scarcely as tentative as the Secretary of State for Trade putting up on the annunciator that he would make a statement at half-past three and then failing to do so because, quite clearly, there had been such a tentative approach by the Government that the whole matter had to be delayed for some weeks while ministerial colleagues sorted out what was to be said on the subject.
The matters being considered by Bullock are extremely complex and extremely controversial, and there is no

doubt that there is very considerable disagreement on them among Members of the House. So we welcome the fact that the report is to be given careful consideration. However, I doubt whether that is a reason for justifying the dropping or delaying of a number of measures which appeared in the previous Government's 1973 Bill.
You have suggested, Sir Tom, that we should concentrate on this Bill rather than on that Bill. It may be that at the end of the day there is no great difference between them, because we might wish to consider some new clauses in the 1973 Bill which we feel ought to be added to this Bill. That is a matter for the later Committee and Report stages if the Bill obtains a Second Reading this morning.
We recognise that there are large areas of company law to be considered; employee participation and Bullock is one. I suspect that the Under-Secretary did not mention it because he may be assuming that no legislation will be required, but there may be another area concerned with inflation accounting. I think that perhaps in the end we will find we need some legislation on that.
There are various other matters to which the Under-Secretary referred regarding the financial structure of corn-panics. My own feeling is that the right course of action is to have a series of separate Bills dealing with each matter, drafted with the intention of eventually interlocking and being consolidated in a single measure. But I do not think that it is possible for the House to consider the whole lot in one Bill, because I do not think we would ever get it through in the course of the normal parliamentary timetable between the beginning of the parliamentary Session and its end. It would be too big to deal with. I think therefore that it is right and proper that there should be a series of separate Bills. What worries me is that the Government appear to be delaying action on a number of matters on the grounds that they will subsequently be introducing legislation on, say, the Bullock questions, when delay is really not necessary, provided that the Bill is originally drafted in a form which will enable it to be interlocked. After all, any Bill consists of a number of clauses, and how they are split up—providing that


they are all drafted with the ultimate consolidation question in mind—is to some extent arbitrary.
The Under-Secretary said that the part of the memorandum dealing with the financial and manpower implications reads:
Overall, when fully in force, the Bill is expected to result in a net increase in staff of about 60 at a cost of approximately £150,000 a year.
That provides an interesting comparison with the financial and manpower implications of the 1973 Bill:
The Bill will result in a temporary increase in staff of about 55 at a maximum of approximately £100,000 a year.
It is some indication of the inflation in Civil Service salaries in that period that apparently an extra five men will cost another £50,000. In the 1973 Bill it was ultimately expected to have no net increase in manpower, whereas in this Bill it is expected that there will be a permanent increase in manpower. The savings in the 1973 Bill will not be implemented for some time.
I turn to two points which were in the 1973 Bill and which the Government have omitted from this Bill, but which I understand the Government intend to include in their ultimate proposals for company law reform. I do not at the moment understand why the Government feel that they cannot introduce in this Bill measures to deal with insider trading. That would not in any way be incompatible with any proposals that may emerge or any legislation which will eventually be drafted as a result of the Bullock Committee report or based on Sandilands or anything else.

Mr. Clinton Davis: This is one of the things that we should want to have included in the securities legislation. I thought that I had made that clear. Before I sit down, I ask the hon. Gentleman to address his mind to one other matter. He has commented on what could be included in this Bill and extrapolated from the 1973 Bill. Does that include the provisions for disclosure?

Mr. Higgins: No. There are a number of questions on which it is right to look carefully at what is proposed. The Under-Secretary will know that that question is one on which there is a difference

of view as to at what stage and in what form these measures should be introduced. I do not understand why he feels it essential that measures to deal with insider trading should not be included in this Bill rather than the subsequent securities Bill. If the drafting is sensible there is no reason why that should not form another part of the ultimate jigsaw. All it means is that a particular segment of the jigsaw is protruding and will eventually interlock with the latter Bill. But he has not really convinced me of that.
The Opposition are concerned about these matters. The expression "the unacceptable face of capitalism" was, after all, coined on this side of the House, albeit somewhat controversially, and there are certain matters on which it seems to us that one could improve the existing legislation without delay. I hope that the Minister will give careful consideration to that. It need not wreck any subsequent securities Bill which he has in mind.
Clauses 12 to 17 of the 1973 Bill provided a basis, though the Under-Secretary might like to modify it somewhat, for dealing with that problem. The problem of warehousing, dealt with in Clause 18 of the 1973 Bill, is more difficult and may require further consideration. We should have to look at that. But although the economic environment has changed since 1973—we can certainly agree on that—we are, after all, legislating for all phases of the economic cycle both up and down. I should have thought that the insider dealing points were relevant in both stages of the cycle. and I hope we can persuade the Government to take action on this matter without waiting a considerable time before dealing with the problem.
That having been said, I want to make one or two more specific points on the matters which have been raised by the Under-Secretary. The first point—and I think that my hon. Friend the Member for Mid-Sussex may wish to enlarge on this in greater detail—is the question of small companies. There has been a tendency, in drafting this measure, to ignore too much the difficulties faced by small companies. In particular, and at the risk of being pedantic—though it is not unimportant to the individual small company—there is the question in subsections (1), (4) and (6) of Clause 1 whether


the accounts have to be printed, and, if so, to whom those printed accounts shall be given.
For a small company printing may be quite an expensive process. It seems an odd piece of drafting that the Government should have insisted that these accounts should be printed, when so many other cheaper methods of reproducing perfectly legible accounts are now available. Whether it is at the instigation of the printers' union I am not entirely certain, but it seems to be an unnecessary restriction which could be a problem for small companies. It could put up their costs. There are a number of points which need to be considered in the light of the position of small companies, and we shall hope to return to those in the course of the Committee stage.
The other point relates to the delay in filing accounts. I find myself in sympathy with what the Under-Secretary said. He quoted a figure of 186,000 firms in default on their accounts last year. I know only too well, because I tried to chase it up when I was in the Treasury, the very real mechanical problem there is in contacting people. Their addresses change; they are never available, and so on. There is a case for tightening this up as much as we can.
Perhaps we ought to consider whether there is a case for some abbreviated form of accounts, if the company has been completely moribund for a year, and perhaps no transactions have taken place within that period. I should have thought that some statement to that effect might be a way of speeding up the companies' own reaction to the duties laid upon them. I should like to consider that at a later stage.
The other point concerns the penalties which appear in Clause 4. Again, particularly in the context of small companies, which may have difficulties in producing accounts for various reasons, the penalties seem to be heavy.

Mr. Clinton Davis: They are maxima.

Mr. Higgins: They may be maxima, but £400 and £40 per day is a hefty penalty. Although they are the maximum, perhaps we should consider whether they should be varied a little, to take into consideration whether the company concerned has a vast staff doing

nothing else but preparing these accounts, or only two or three individuals who obviously have problems, particularly if sickness arises.
.The other main points about which we need to be concerned are the auditors' qualifications. I am worried about what the Under-Secretary said on that. It would appear that the Bill, as drafted, is restrictive on those who can now become auditors. We understand the reason for that, but I have received representations from members of the British Association of Accountants and Auditors, who, apparently, are not to be included in this. We shall need to look at that point with some care. The report of the inspector in the case of the London and Counties Securities Group, this massive document which I have here, is extremely relevant to many of the points which have been raised.
What worried me was that the Under-Secretary said that the accountancy bodies would set up a committee to look into this, and obviously there are a number of lessons to be learned. They almost jump out from the printed page of this massive document. Are these Committees expected to report before consideration of the Bill is completed? It would seem an odd situation if the Minister were to say that this whole thing is tremendously urgent and that we must make speedy progress. I understand that this may be so with auditors.
There are other lessons to be learned from the London and Counties Securities Group report, but those lessons are not to be spelled out by the accountancy bodies, if they are undertaking that study, until after this legislation is enacted. That is surely a very stupid arrangement. We should either wait until we have the comments of the experts on all those bodies, or we should make arrangements for their views to be known before the Bill becomes an Act. The Minister does not seem to have considered this, but I do not think that we can let the matter rest there.
As has been spelled out, for example, in an article by Mr. Kenneth Fleet in the Daily Telegraph on 4th February 1976 headed "A true and fair view of Caplan's auditors?", a number of very serious questions arise in the case of this report as far as auditors are concerned, which ought to be taken into account in this


legislation. Otherwise we shall simply not learn from the most recent and relevant case which appears to exist. Clearly, we shall wish to go into this at a later stage.
Another point I should like to make concerns the question of resignation, and the definition of what constitutes resignation. The Minister did something to clarify this position, but it seems a little curious that apparently an auditor does not actually resign in present circumstances unless he specifically gives notice of his intention to do so; otherwise he continues on from year to year. I think that, on balance, the measures which the Government now propose on this are very much to be welcomed.
However, in the light of the London and Counties question, there arises the definition of who is actually the auditor. One of the persons concerned in carrying out the audit, as I understand it, resigned. But I presume that he was not the auditor as far as the actual proceedings were concerned. Therefore, I am not sure that we should not consider—there may be strong arguments the other way—whether something ought to he done about that. At all events, I think the proposed changes are an improvement, but I am not clear whether they will cover all the points which recent experience has suggested ought to be covered.
The final point I should like to make is on the question of the future legislation, particularly the position in Europe. Perhaps my hon. Friend who sits in the European Parliament might wish to comment on that.
The Minister said that the questions of the second, third, fourth and fifth directives were likely to be debated—I think he said soon. I hope that when his hon. Friend comes to reply he will be a little more explicit about that. I realise that it is a matter for the Leader of the House, but are we to understand that he expects that there will be a debate within the next few weeks, or before we rise for the Summer Recess? It would be helpful to us in carrying out consultations if he could make the Government's initial intentions clear.
Important questions arise on the classification of companies, and these might well arise in the course of debate on the

Bill. I think it is very important, when we come to consider the major reforms, that this should be done in the form of a Green Paper. I believe the Green Paper approach has a tremendous amount to recommend it. When the previous Government introduced value added tax, for example, and a number of other measures, the advantage of carrying out the Green Paper consultation was very great. The disadvantages of not doing so are amply demonstrated by the capital transfer tax introduced with absolutely no consultation or Green Paper approach whatsover.

Mr. Clinton Davis: Like the Industrial Relations Act.

Mr. Higgins: On the contrary, we published one before the Election. One cannot publish a Green Paper in opposition, except nominally.
As to the company law side and the Department of Trade, the case for a Green Paper approach is every bit as strong as in the case of Treasury matters. I hope, therefore, that we may have a clear statement from the Minister before the end of the Committee and Report stages that it is the Government's intention, when they receive these various reports which will affect their overall review, to publish them as a Green Paper before introducing legislation.
We note the point he makes about the possibility of introducing the Bill for Second Reading. I do not know that that is exactly the right approach. Perhaps I might commend to him the procedure which we adopted on some of the previous Government's Finance Bill proposals of publishing in a Green Paper the proposed clauses as a draft. It would be clumsy to do what I understood him to be suggesting—namely, to publish the Bill as such, give it a Second Reading and then try to reconsider it. It gets too set at that point. At that stage one is lumbered with it and one loses face if it is withdrawn. To do what we did, to publish in the Green Paper the draft clauses showing what we had in mind but without commitment and without the danger of losing face if they were subsequently changed, is the most sensible approach to the long-term review to which the Minister referred.
Obviously this is a temporary measure. Our main concern is that, on the one


hand, it may not include things which could at this stage quite sensibly be included and that, on the other hand, it may to some extent be premature, because the views on the lessons to be learned from recent events, particularly in auditing matters, have not yet become available.
In general, we would not wish to oppose the Bill. It is, on the whole, for reasons which I have outlined, non-controversial. If it turns out to be as "non-controversial" as the Insolvency Bill, we shall be in trouble, but I hope that that will not be the case and that we shall make progress. I certainly do not wish to oppose its passage this morning.

11.31 a.m.

Mr. Ben Ford: I well remember discussing these matters on the Second Reading of the 1973 Bill and I was very interested to hear my hon. Friend refer to industrial democracy legislation, the implementation of which may have some effect on company legislation in this country. During the passage of the 1973 Bill—I am sorry to refer to it again and hope that it will be for the last time—I was prepared to submit a series of amendments on these matters, but I note that we are awaiting the report of Bullock and also a larger review of company legislation, so I am content to leave the matter in that setting.
I was interested to hear my hon. Friend refer to the large number of companies which failed to file their accounts on time. It seems to me that, apart from anything else, one of the major factors in this is the shortage of accountancy capacity in this country. I know from experience that it is often extremely difficult to find practising and properly qualified accountants, at any sort of notice almost, to carry out audits on time. It provides real difficulties for those companies involved, and particularly for smaller companies, because large companies can afford to employ internal auditors, who considerably assist the external auditors.
I believe that the position might well be helped by the recognition of a professional body under Section 161 of the 1948 Act, an application under which is before the Secretary of State. This was also discussed in 1967 and in 1973.

The application has been outstanding for over 20 years, and I believe that the association concerned has made exceptional efforts to meet the criteria of the Department, which have been changed from time to time. I am satisfied that those criteria are now met. All I want to say now is that I hope that my hon. Friend will give careful and personal consideration to the application before the Department.
As it is proposed to withdraw the opportunity of qualifying according to adequate knowledge and experience on an individual basis, it seems to me more necessary than ever that the Secretary of State should be seen to be giving proper and exhaustive consideration to any applications for recognition by professional bodies which might come before him. I believe that, as a complementary provision to the withdrawal of individual authorisation, the Department should consider giving a quid pro quo providing for an appeal procedure should the Secretary of State refuse an application for recognition by a professional body, possibly an appeal to the Privy Council.
I should be quite happy to discuss a suitable amendment with my hon. Friend if he considered that that was a reasonable proposition. In fact, I could offer him a draft as a basis for discussion in Committee. It is unsatisfactory that in these days the Department should be both judge and jury in these matters. Therefore, I urge my hon. Friend to give due consideration to my remarks.

11.36 a.m.

Sir Brandon Rhys Williams: As the Committee will soon detect, I am in the process of losing my voice, but, in any event, I should have wished to speak briefly if only to explain why I intend to vote against the Bill.
It seems to me that the Department, while waiting for Bullock, is unable to move. It seems paralysed with fright by the subject of company law, performing a miracle of indecision. The Bill fails to rise to the well-established needs in areas which have nothing to do with the terms of reference of the Bullock Committee. Apart from the very important questions of workers' rights and representation, there is an urgent need for more effective supervision, particularly of companies which are too large for


shareholders to watch at close quarters but which are outside the regular supervision of the investing institutions, the Press and the Government. At this juncture a Government Bill dealing with accounting practice and the appointment and responsibilities of the auditors ought not be a purely routine and insignificant measure. The Bill represents an opportunity wasted.
The British joint stock company is the most fruitful invention for combining human and material resources for the creation of wealth, but the version of the joint stock company which is standard in this country can often be a very sick organism. There is all too much evidence of that in the newspapers every week. The British joint stock company needs a built-in corrective mechanism, which our present company law does not provide.
We need not think in terms of a great leap forward in company law reform. A Bill as short as this one could well have made useful advances in the direction of improving the supervisory forces going beyond the audit but not as far as the appointment of inspectors.
The question of limited liability and its significance and what followed from it was touched on by the Minister in his opening remarks. What flowed from it in the nineteeth century was the practice of the audit, which has been brought to a fine pitch of efficiency in this country. On the Continent, for all sorts of reasons, the idea of the audit did not develop in the same way as it did in this country. Instead, particularly in Germany, over the last 100 years there has been the development of the supervisory board, whose functions, to a great extent, embrace the functions of British auditors but go far wider. We have seen since the war the notable leap forward in German company practice that the supervisory board includes representatives of the employees, who are recognised as stakeholders in the company just as much as the shareholders.
That is the direction in which, quite rightly, British company law is now tardily moving. One regrets that the change has taken so long. Though two-tier boards on the Dutch model or one of the continental models may be the logical solution to the major problems of

the British Company, though we are now learning much from the writings of the Commission and of continental thinkers on company law reform, we cannot contemplate such a sudden move in one Act of Parliament. We must build on what we have and take our time, even though we can clearly see the direction in which we are heading. If we are to build on what we have, we must build on the practice of the audit. In this country it is now highly professional and skilful and is carried out with exemplary integrity.
The public has learnt to rely fully on the integrity and competence of the auditors, and the very rare occasions when they fall down become headline news. However the practice of the audit has two major deficiencies. First, it concerns only the past. It is an historic investigation. Secondly, it is too narrow in scope to exercise an effective supervisory function over top management's efficiency and integrity. The responsibility of management to the employees is totally outside the scope of the audit.
The Bill contains many necessary—perhaps urgently necessary—measures, and I would not wish to oppose their becoming law as quickly as possible. However, it seems to me that the Bill makes two mistakes. First, it enshrines the historic principle where the audit is concerned—that is the point of Clause 12, but it is present throughout the Bill—and, secondly, it lays down restrictions on the qualifications of the auditors which, though possibly justified in the professional practice of traditional accountancy, show that the Government are making no moves to widen the scope of the audit. This is a serious lapse.
I was eager to be a member of this Committee mainly because I have introduced a series of Bills on company law reform in each Session since 1969, the object being to strengthen the non-executive directors and lead them to carry out more effective supervisory functions. The same result could also be achieved by adopting the practice of appointing non-executive directors to an audit committee, as I believe is increasingly standard practice in North America, and by giving it specific responsibilities to supplement and extend the audit function.
I would like to see in the Bill some move in that direction, or at any rate


to hear the Department's views on this idea. To serve the audit panel, the company must be prepared to provide to the non-executive directors who serve on it the information and estimates to enable them to satisfy themselves about the company's continuing profitability and its ability to pay its debts as they fall due. In other words, statutory company data should look to the future, not only to the past. The Bill could easily have made such provision for widening the scope of the audit, thereby strengthening the forces able to exercise the supervision of top-level management. In so doing, it would not have cut across the line of direction of the Bullock Committee. I think that the Minister nodded assent when my hon. Friend suggested that we could not reform the whole body of company law in one Bill, but that we should need a series of Bills. The Bill could have been the first of such a series and a notable and useful step forward. As it stands, the Bill falls below the crying needs of the moment. I shall vote against its Second Reading in an effort to bring the Department to a sense of its responsibility or, at least, to gain a hearing for some minor but useful and significant amendments at Committee stage.

11.44 a.m.

Mr. Brian Sedgemore: When I arrived at the House at five minutes past 10 this morning, I had no idea what the Companies (No. 2) Bill was about. I did not know its Long Title, let alone any of its clauses. I assumed that I was coming to an uncontentious Committee which would soothe the nerves—a substitute for gardening or home decorating. My surprise and delight, when I saw what the Bill was about and when I heard the Minister introduce it in that contentious and pleasingly aggressive fashion of his, may be imagined.
I am disappointed that the Bill does not go wider. The joint stock company may or may not have been a fine invention in its day, but its day is past. It was set up to bring together the concepts of ownership and control. The link between ownership and control has long since broken in most private companies because of the managerial revolution, which itself, however, is now seen to have been inadequate for the control of a modern company. The managerial revo-

lution is on the way out and we must now create democratic industrial organisations. Instead of managerial control, perhaps we shall hear more about worker' control in the future, although the phrase is much misunderstood and disliked.
I was delighted when the Minister said that the subjects of warehousing and insider dealing will be dealt with, because these are major issues which affect not only small companies but large companies and significant figures. It has been said that unless one has been heavily involved in insider dealing, one will not these days be promoted to the House of Lords. Insider dealing is a concept which the Chancellor of the Exchequer must have had in mind when he spoke about men in the City "fainting with greed". It is a pity that there were not more criticisms of insider dealing from the City, the CBI and the Conservative Party, as it is well known that it has been a main feature of our speculative industrial and commercial life for many years.
I shall say a few words and ask the Minister a few questions about the measures in the Bill, because we may have to insert several amendments in the coming months. First, although it is easy to talk about increasing penalties, the Minister almost gives the game away. He states that 186,000 companies are not keeping to the law as it stands. In which other branch of British public life are the directors of 186,000 companies committing criminal acts and going unscathed?
We will not bring companies into line merely by increasing penalties. There must by a better enforcement procedure. The Minister should say much more about that enforcement procedure. I have been writing to him about a particular company over the matters at the heart of the Bill. The company— Chrysler—has been given mililons of pounds of public money. I have written to the Miunister about one of its overseas marketing subsidiaries—Chrysler International SA. I wished to ascertain if we can find out whether Chrysler is indulging in transfer pricing. There is plenty of prima facie evidence, but we cannot pin the company down without details of the company's subsidiaries and the subsidiaries of the main subsidiaries. Chrysler International SA has an office at Bowater House and is obliged to file certain returns at Companies House, but


it failed to do so in each year from 1969 to 1974. It did not comply with the law in each and every year from 1969 until 14th September 1975. It only complied with the law then because pressure was being brought by people outside and by people like myself.
Until Chrysler International SA cares to comply with the law and file the accounts in a proper form we cannot find out whether the overseas marketing subsidiaries are making considerable profits and whether those profits are being siphoned off from this country to its headquarters in Switzerland. This is a classic example of the kind of problem we want to solve with this Bill. I do not believe that there has been nearly enough "clout" on the part of the Registrar of Companies over these issues.
What has happened on this issue is that the Ministers and the Registrar of Companies have woken up to the fact that the law is being broken. Chrysler International SA, despite the fact that up to £162 million of public money has been guaranteed or given in loan to the company, is now trying to claim exemption and is looking at ancient legal Acts and trying not to file the accounts of these subsidiaries, despite the fact that public money is being poured in to save not only the British company but the Chrysler Corporation itself. As the Minister knows, this needs looking into. There is a serious need to adopt a far more stringent and rigid approach to the whole question of filing returns.
There is one other point I want to make concerning the question of auditors. It has concerned me for some time. I make it in relation to two specific examples. The first concerns the collapse of the secondary banks with mellifluous names such as London and Counties Securities, Moorgate Mercantile, Western Credit, Cannon Street Investments and Keyser Ullman Limited. The names lick easily and comfortably round the tongue. What did we see in relation to the secondary banks? On 30th November 1973 London and Counties went bust and subsequently about 30 banks fell into various degrees of difficulty and had to be bailed out in a rescue operation brought about, clearly, by the Deputy Governor of the Bank of England, Sir Jasper Hollom. What is serious about that systematic

collapse of secondary banks is that any auditor looking at the books of most of those companies could not apparently understand the balance sheet or the asset structure of a bank and the implications of the ludicrous asset structures which those secondary banks had built up. Either these men of integrity could not do that, or they were behaving in a wholly irresponsible fashion. I do not believe that the law dealing with auditors is satisfactory or that they always behave with great integrity. The collapse could have been foreseen well before those companies got into serious difficulties. We need to tighten up the law in relation to what auditors do and do not put in the signed statements. Some of them got away with ludicrous statements about the nature of the secondary banks which they puported to audit; I have quoted them in articles.

Mr. Ford: Rolls-Royce.

Mr. Sedgemore: My hon. Friend says "Rolls-Royce", and he is quite right.
I do not want to delay proceedings this morning because clearly we shall have plenty of time in Committee, but the last point I wish to make refers to transfer pricing. We need something written into the law which says that the auditors must, when they give their statement, either say that they think that a practice is transfer pricing, might be transfer pricing or that a given commercial activity would have the same effect as transfer pricing. I could set out for this Committee innumerable kinds of commercial activity which, on the face of it, do not look like transfer pricing, but which have that effect. It is time that auditors faced up to their responsibilities in this sphere more than they have done. We shall probably be discussing amendments on that point, if you call them, Sir Tom, at a later stage. On the whole I shall be in there battling with the Minister over this Bill and supporting it. I am surprised that Conservative Members are not giving us support also.

11.54 a.m.

Mr. Dafydd Wigley: I do not intend to speak for long, but I certainly join with the hon. Member for Luton, West (Mr. Sedgemore) in some of his comments. In this Bill there is more opportunity lost than opportunity secured. There is a possibility of doing very much


more that needs to be done. The Bill is pretty thin. It covers some points that are important, but it omits a number of points which were in the 1973 Bill that never got off the ground to which reference has been made, and other points to which hon. Members have referred. I look forward to joining the hon. Member for Luton, West over the coming weeks and months in pursuing some of these points and, I hope, writing in certain clauses that could be contained in the Bill and need to be there.
Reference has been made to the question of auditing by the hon. Member for Kensington (Sir B. Rhys Williams) and others. I am certain that there is a need to encourage much more positive auditing. Historically, auditing tended merely to look back on figures, whether correct or otherwise. The function of positive auditing that is an aid to running the company, securing genuine control of it and providing better information for all those who take decisions, has developed in some auditing companies but it is certainly not universal. We should be looking for means of helping in that direction.
Mention was made of the rôle of supervisory boards in this context. I am not certain that I agree that supervisory boards and the auditing functions overlap. There is room for changing the structure of companies. If the Bill does not do this, I very much hope that next year we shall see a Bill that will come forward with a much stronger degree of industrial democracy. I agree with the hon. Member for Luton, West in terms of worker control, although there may be questions of definition, and we look forward to Bullock's comments and recommendations in that context.
The supervisory board is an insufficient tool for securing the type of development that many people are seeking. The supervisory board may be all right in the German industrial context. I am not certain that it will bring results here. It may only cause another tier of problems. We must set up a group of people who are in control and are genuinely answerable to more than simply those who have been the owners of capital. The joint stock companies Acts of the last century may have been all right in their day, but they need changing now. We need a Companies Act that is as substantial as

the 1948 Act to reflect the change in thinking in these matters.
There is one specific item that was in the 1973 Bill but is not contained in the present Bill. I hope to table amendments later to cover it. Hon. Members may not be surprised to know that I refer to the old Section 103 and Schedule 6 to the 1973 Bill which dealt with allowing the Welsh language to be used for companies in Wales. A certain number of companies already use it. Technically they may he outside the law in so doing, and problems exist. I am surprised it has not been included because it is not a contentious party point but something that a number of solicitors in Wales have been considering. It was put forward by the then Conservative Government and I would have thought they would support amendments to write it into this Bill.
There are other matters that I should have liked to have seen covered by the Bill. Perhaps there will he an opportunity to table amendments concerning those too. First, I believe there should be a greater requirement for accounting to show plant level profitability, particularly in multi-plant companies. Where plants are small this may not be possible. Where there is a plant employing between 5,000 and 10,000 people, however, there should be available to the employees in that plant accounts and figures that show its performance. This is part of the question of disclosure. Disclosure has been covered to some extent in the Industry Act. Those provisions are not wide enough, however. They apply only in certain manufacturing concerns and not to all commercial activities. We shall have to face the question of disclosure in later Bills. Having information is fundamental to any negotiation.
We have seen so often in the past that the only bullets in the armoury of management in negotiation has been the possession of information that the other side did not have. That is not a genuine or correct basis for meaningful negotiation in industry. There should be a fundamental tenet that information is freely available unless there is a very good reason to the contrary. There should be provision in this and similar Bills to bring this about.
Another matter that I should like to see strengthened in company law is the movement of assets. Over the past 10 years grants have been available in development areas for the purchasing of assets. There is grave suspicion that in certain companies there have been transfers of assets from within development areas to other areas, and perhaps there is not enough control over this. Clearly, it is the type of fiddle that should not be condoned in any way and we should pay greater attention to that.
On the question of regional grants, I should like company law to be strengthened in order to ensure that company accounting makes certain that regional grants are treated in a positive way. Often grants are treated as miscellaneous income, and the whole point of the grant is missed. It should be to make the cost of an asset less—or, in the case of regional employment, the cost of labour—so that investment decisions will be more favourable in those locations. But many companies do not account for these moneys in a way that permits those decisions to be any different from decisions taken in a non-development area. A Bill such as this should be making that sort of provision as well.
I, too, look forward to the opportunity of tabling amendments at later stages and co-operating with other hon. Members in that direction.

12.1 p.m.

Mr. John Loveridge: The Minister will be pleased at the general welcome which has been given to the principles behind the Bill, though some of us will feel considerable sympathy with the criticisms voiced by my hon. Friend the Member for Kensington (Sir B. Rhys Williams).
Although the principles are welcome, it should be placed on record that it is a pity that we have to have another bit of what might be termed itsy-bitsy legislation. The Bill is very limited in its scope. On perhaps half the Committees of the House of which I have been a member, at some time an hon. Member must have asked, "Cannot we have more codification of law? Must we continually write in references to Acts going back to archaic times?" Here we have an additional measure on a matter on which, as soon as the Bullock report has been considered,

the Government will bring in new legislation. Surely it should be covered by a single codified Act so that the public can understand it readily and easily.
I especially have in mind the smaller businessman who has not the time continually to refer to cross-references in different pieces of legislation. I plead with the Government to bring their legislation forward, as far as possible, in a way that is codified and simpler. The Minister will sympathise with this view, because Ministers are always sympathising with it. But the constraints of life, I understand, make it difficult for him.
However, in spite of this confusion for the pubic, no doubt there will be a great easing when the suggestion of the hon. Member for Caernarvon (Mr. Wigley), that the whole thing should be in the Welsh language, is adopted. Unfortunately, that will be not very helpful to me.
There is something about the principle behind the Bill that worries me. Has enough consideration really been given to the number of people who are likely to have hanging over them the possibility of these substantial fines? The Minister has told us that there are 186,000 cases in default. That is a tremendous number. Twenty-eight thousand have been struck off the register as being presumed defunct. That is a simple way of getting rid of them. Would it not have been possible for the Government to bring in a simple requirement that the auditor should notify the registrar if a company is not trading, so that after an appropriate time it could be stuck off without there being any possibility of a fine hanging over the heads of tens of thousands? Too many people are now living in fear. Why add an unnecessary fear when simpler methods of administration could remove that fear and have the same effect?
On the question of the time, seven months is allowed for public and other than pivate companies and 10 months for private companies, to get their accounts in after the appropriate period. I can understand that nine months might be considered a natural period in human affairs, but why seven and 10 months? Why not a simple period such as one year, that everyone can understand? Many who start small companies are simple people. They may be small


builders with not much educational background. Why not make life easier for them so that they do not have to think of periods that are unnatural to them, when they are busy and hard working? Perhaps it is the wife who keeps the accounts and perhaps she has children as well. Why not make it something like a year? It would be much simpler for these small people about whom I feel concerned.
On the question of the smaller companies, surely we need some way of helping the smaller person to get off the ground. I know that there are many companies. But we know from what the Minister has told us that a large proportion are in difficulties. They are in default; they are in arrears with their paperwork. Is it not possible for the Government to consider, when they consider the Bullock proposals, bringing forward some simpler form of company structure for the very small company just starting up, with simpler records to be registered? This is important, because a small man in charge of a business has to do eveything. He cannot afford to consult solicitors and expert accountants other than those necessary to keep his books and make the necessary registrations and tax returns required by the Government. He has not the facilities of a large company, of departments with expert heads to consult.
We all sympathise with the criticisms made of large companies which are in arrears. They ought not to be in arrears. The hon. Member for Luton, West complains about this. But when one wants something that affects a small number of companies, why make life difficult for hundred of thousands who are trying hard to build up something not only for their families but for the whole nation?
One other matters seems to cause anxiety—the time for serving notice under Clause 21 where someone in default may be called before a court with the possibility that he will be prevented from serving as a director. Ten days' notice seems very little. He will be entitled to call witnesses. That is proper. But will he be able to find those witnesses readily in 10 days? Will he be able to get them over here if they are situated overseas? I do not think 10 days is anything like adequate.
Nor is there any specified way in which the notice should be served. The post is not good enough. Any of us who have served as magistrates know how the postal service often goes astray and leaves distress and misery. Convictions are entered in lieu of any defence because the people have not known that they should be in court. I had a rather tragic case of a woman who had been awarded a court order for the custody of her child when her husband went away to Scotland. She lost the custody of the child because a Scottish court overruled the English court. So she lost the child. The reason was that she had no notice and could not be represented in the Scottish court. That was a case of conflict of laws between Scotland and ourselves. But it is an example of how the ordinary person is now beset by the magnitude of the problem of trying to deal practically with the laws that we in this House introduce on such a massive scale.
Therefore, I ask the Minister to consider lengthening the 10 days' requirement for notice to allow witnesses to attend, and also to introduce a provision to ensure that there should be personal service of the notice under Clause 21.
I conclude by making a plea for these small people. Many cases of default over the filing of accounts arise not from wilfulness but from sheer incompetence or sheer exhaustion from overwork, or from illness in the family where there is no one except perhaps the husband or the wife to help. In those cases it is not right that people who, in the main, are fundamentally honest, anxious to obey the requirements of Government, all doing their best, should have hanging over their heads a £450 fine and very substantial daily fines thereafter, except in those cases where that is absolutely an essential requirement. Administrative means could be found, I think, to eliminate possibly tens of thousands from this sphere if only the Government would reflect on the machinery of this administration.

12.11 p.m.

Mr. Tim Renton: This has been a useful debate, uncontroversial except in the remarks of the Under-Secretary when he tried to stir up controversy by some unnecessarily unflattering comments about


the 1973 Companies Bill of the last Conservative Government —not only uncontroversial, but in a large degree unanimous in that again, apart from some of the opening remarks of the Under-Secretary, there has been concern and surprise on both sides of the Committee at the fact that more is not in the Bill, rather than less. This was echoed by the hon. Members for Bradford, North (Mr Ford) and Luton, West (Mr. Sedge-more), and I concur with that feeling. The Bill is more remarkable for what it omits than for what it contains.
We are led to wonder why it was necessary to bring forward this very small truncated Bill. We all agree with the necessity to give more power in the immediate future to auditors. This is well covered by a number of clauses in the Bill. But we all feel that it could have contained more. When the Under-Secretary in his opening remarks assured us that we would be given a major Corn-panics Bill in the 1976–77 session, and that was the reason why this measure contained so little, some of us on this side of the Committee were prompted to laugh, and he objected. But I think it is only necessary to go back a little in history to see why we laughed.
The Jenkins Committee reported in 1962. The first Companies Bill following on Jenkins did not become law until 1967. There was a gap of five years. Many matters were covered by Jenkins which were not included in the 1967 Bill, and a number of these were in turn covered by the Conservative Companies Bill printed in December 1973, a gap again of six years. Now another three years have passed and we are given this modest little measure.
I find it hard to believe that the Bullock Committee will be able to report in time in 1977 for there to be a Green Paper and legislation in that session. It is more likely that a major Bill will be held over for the simple reason that company law legislation is the Cinderella of legislation. It is not popular with either party. It tends to be delayed. Therefore, I think it more likely that a major review will be held over for at least another year and a half.

Mr. Clinton Davis: When I adverted to Bullock I said that we expected that

it would complete its report by the end of the year and that a Bill might be introduced. It is bound to be a controversial matter, and the way in which public discussion can be undertaken is a matter which we shall have to consider when Bullock has reported. But one of the options open was the introduction of the Bill. This is simply an option available which we shall have to consider very thoroughly. The hon. Gentleman should not have suggested that, because Jenkins was not the subject of legislation for so long, the present Government will necessarily follow the pattern of their predecessors, both Conseravative and Labour.

Mr. Renton: It would seem that the only chance of the Government altering the pattern is for them to introduce very much less controversial and nationalising legislation than they have shown an inclination to do in the last few years. If they were willing to do that. I would be more optimistic about the chances of having a major Companies Bill. As it is, Bill until about 1982, by which time on past pattern it seems more likely that we shall not have a major Companies the next Conservative Government will be preparing for a General Election. It is likely, therefore, that that Bill would, in turn, languish on the shelves and would not become law. It is against that background that the Committee has echoed this morning the feeling of regret that more non-controversial matters could not have been included in this measure. The hon. Member for Caernarvon (Mr. Wigley) used the phrase "opportunity lost", and I agree with him. It is an opportunity which could have been seized without any great difficulty.
Before moving on, I should like to refer to the comments made by my hon. Friend the Member for Kensington (Sir B. Rhys Williams). He told us that he was not prepared to support the Bill, and that he would vote against it. In that I would not encourage my hon. Friends to join him, but I think it is worth putting on record the very great contribution to the study of company law that my hon. Friend has made. He has made it something of a speciality of his own, and by persistence he has constantly repeated the theme that the rôle of non-executive directors on boards should be


strengthened, a theme with which I personally have some sympathy. We must congratulate him on the fact that, by virtue of getting his Private Member's Companies Bill printed on 25th February, he has actually forced the Government to call their Bill "Companies (No. 2) Bill", which in itself makes some change to the statute book.

Mr. Clinton Davis: It is not on the statute book.

Mr. Renton: I take it that the Government's Bill will be described as the "Companies (No. 2) Act" on the statute book. The Under-Secretary corrects me. At least we have the opportunity of referring to it as the "No. 2 Bill" at the moment, thanks to the work of the hon. Member for Kensington.
The Under-Secretary, in opening the Second Reading debate, regularly referred to waiting for Bullock as being the major reason why we could not have a more substantial Companies Bill at the present time. I hope that waiting for Bullock will not become like waiting for Godot and that there will not be constant delays. But I feel that there may be, for two reasons: first the weight of evidence that has been submitted to Bullock, which is obviously right. This is a major matter that the Bullock Committee is studying. but there is the further fact that the Bullock Committee will only fulfil the expectations that arc hoped for from it if it goes beyond its own terms of reference. This point was made in the debate in another place, and I am sure it is right.
The terms of reference of the Bullock Committee require it particularly to take into account the proposals of the Trades Union Congress report on industrial democracy, but, as many of the submissions to the Bullock Committee have shown, unless it goes well beyond those proposals, it will not consider in depth the question of employee participation in management in the way that we should like. The trades union proposals concentrate specifically on the question of trade union dominance of company boards, and thus of companies themselves, rather than on the question of employee participation. This was particularly so when they made their comments about supervisory boards. Paragraph

106 of the TUC report on industrial democracy states:
… Provisions about Supervisory Boards in the new Companies Act would only become operative where there is trade union recognition; and representation of workers could only be through bona fide trade unions choosing to exercise this right.
This appears to show a far greater concern with trade union participation than with employee participation. It is necessary for Bullock to consider this matter more fully than the trades union proposals seem to have done.
The trades union proposals anticipated a major change in the responsibility and structure of boards. Paragraph 91 of their submission reads:
… The Supervisory Board would be the supreme body of the Company and while it would take into account the interests and views expressed at the AGMs of shareholders, it would not be bound by them.
If that were to happen, it would require a substantial change in company law.
Bullock must look more deeply at this matter than the trades union proposals suggest. It is a separate matter. We have all felt—and this has been echoed this morning—that it would have been possible, without waiting for Bullock, to have had a Companies Bill which dealt with those aspects of company law, particularly on securities, that were covered in the Jenkins Report and that were outlined in our 1973 Companies Bill and are themselves not tangential with what is being looked into by Bullock. It is on this point that our disappointment particularly lies.
The hon. Member for Luton, West touched on some of those matters: insider dealing, non-voting shares, the difficult problems outlined in Clause 45 of the 1973 Bill concerning the private interests of directors and the interests of directors in associated companies, the prohibition of loans to connected persons and provisions on minimum issued share capital. All of them could have found favour on both sides of the Committee.
We know that the accountancy bodies are in favour of such proposals being brought forward in a new Companies Bill and one wonders, therefore, why they have not found their place in this Bill. It is a matter of regret that they have not. The Under-Secretary appeared to


imply that I was Victorian and archaic in my approach to company law, and that I would resist change of any sort. How wrong he is. I would welcome change. I believe changes are necessary, and I repeat that I regret tat he has not found a place for them in this Bill.
I have found Clause 2, dealing with the accounting reference period, and Clause 3, on the alteration of the accounting reference period, extraordinarly difficult to understand. It may be that I read them late at night when I was feeling tired, but I tried to read them several times and found the wording poor. I hope that if there is an opportunity to tidy it up in Committee the Government will seize it.
Clause 6 falls into much the same trap, and it is clear that there has been a problem. Perhaps the Parliamentary Secretary will say whether he feels this has been dealt with fully. There has been a problem, which was raised by the Committee of London Clearing Banks in the inter-action between this clause, and its provisions, and those of Sections 126 and 131 of the 1948 Act which have not been repealed. The problem hinges around the time for filing returns and company accounts which now appear to be out of step with each other.
One of the basic features of the new system is that the filing of accounts is separated from the filing of the annual returns. Sections 126 and 131 of the 1948 Act continue to apply to the holding of the annual general meeting and the filing of the annual return, but do not affect the period allowed for the laying and filing of accounts which is determined by Clause 6. This is not clear from Clause 6 as drafted. It is a matter which should be tidied up and clarified in Committee. If it is not clear to those of us who should have some experience in this matter, it will not be clear to people running small businesses who will be affected by the new Bill.
On the question of Clause 12, I should like to call the Government's attention to what is known as the Romalpa judgment. For those members of the Committee who have not had the chance to study the Romalpa judgment, may I say that it refers to the question of when a vendor sends goods on consignment to a purchaser and attaches credit terms

to them but the title to the stock remains with the vendor. If a bank, or anyone advancing money to the purchaser, takes a mortgage and general charge on his stocks, he will find, if he ever has to exercise that mortgage, that the vendor, which is often an overseas company, says" Pay. These goods, which it might have been thought were covered by the mortgage and general charge, are not. They beloong to us."
In the Romalpa case, when exactly this situation had arisen, the judgment went in favour of the vendor. There is no doubt that the banks. and some members of the accountancy profession, believe that the law may require change, otherwise floating charges will give little security in such instances. It has been said that this is a matter for an accounting standards of practice rather than a change in the law, but I am not certain that that is correct. It is a matter which the Government should look into with a view to making a necessary change in the law, which I believe could be fairly easily incorporated in Clause 12. We shall be able to return to that point in Committee.
I should like to turn to the question of small companies. The 1973 Bill made a distinction between public and private companies. EEC practice has tended to underline that distinction. Unfortunately, that is entirely lost in this Bill.
In my personal opinion, the time is coming when, with the amount of legislation that affects all employers—employment protection legislation, safety-at-work legislation and now disclosure legislation—there will be a case for a separate form of incorporation for the smaller company that would lie somewhere between the limited company and partnership or sole trading bodies.
Let us look specifically at the Bill and consider how it will affect the small company. First, there is the point about the time for filing accounts. I know that many are late at the moment. What about a small company which has to file its accounts within 10 months under this Bill. but has 18 months in which to argue with the tax inspector about whether there will be a surtax direction from the point of view of distribution of dividends? Many profitable small companies hold up the filing of their accounts, not for any discreditable reason, but in order to


finish their discussions with the tax inspector and to clarify whether they will be made to distribute dividends before they file the accounts. That point needs to be cleared up.
We need to look at the level of penalties in Clause 4. It may well be said that 10 months is long enough for anyone, but it is by no means impossible for a small company to have one accountant only. The one accountant may fall ill and have to go to hospital. He may return after a period of months but still be ill. He may continue to try to do his job, his boss may look after him, but he may do his work slowly and not very well.
A case has been quoted to me, where the accountant came back from a period of sick leave. He had disseminated scelerosis and he went on with his job but got worse and worse at it. Finally, the company decided that it must call in the auditor, because the accounts were getting so far behind and and it did not want to sack the accountant, but it could not rely on him any longer. It called in the auditor, who promptly died.
That company, with no malice, no fraud in mind, no ill thought, would now face under the Bill penalties, at the rate stated, of £12,000. This is a matter for review. I know that the Secretary of State can use his discretion, but that is an imponderable matter for a small company. It sees itself getting into this jam and does not know whether it will be socked with an enormous fine. It brings me back to the point of whether there should be some exclusion from all these new provisions for the small company—perhaps a company with a turnover of under £¼ million a year.
Again on this point of small businesses, Clause 12(3) requires that copies of all stocktakings should be submitted. This is totally unnecessary and will lead to a great deal of wasteful paper moving out to the civil servants. As the Under-Secretary will know, grocery businesses or public houses do at least a monthly stocktaking. Often these records are thrown away when they have been taken. Surely it cannot be necessary for all these interim stocktakings to be passed on. I should have thought that the annual statement of stock was quite enough.
Clause 19 requires notification of a new director within 14 days. Again. for

the smaller business this could lead to trouble. It is not a sufficient time. Let us assume that a wife and husband are in partnership, running a small business which is a grocery. Let us assume that the husband dies, and that the wife is left with the business to run, and that she asks her son to come and join her in the business and makes him a director of the company. It is highly unlikely in those circumstances, when she has all the problems of her husband's estate and keeping the business going, that she would remember to inform the Registrar of Companies that she has just appointed her son as a director of the business.
Therefore, all these minor details will lead to more paper work and a larger burden for the small businesses, which are already over-taxed in this respect, and we should seek some exceptions. That leads me to the point from which I started of a separate form of incorporation so that they are excluded. The Bill seems to have been drafted with major companies—ICI, GEC, Unilever—in mind. They can meet these provisions without any difficulty, but I doubt that the smaller business can. I think it will add to its burdens.
I turn now to the question of conformity with the EEC. The Under. Secretary touched on this, but I wonder whether the Parliamentary Secretary could be a little more explicit.

The Parliamentary Secretary to the Law Officers' Department (Mr. Arthur Davidson): I doubt it.

Mr. Renton: The hon. Gentleman is being very modest, but I am sure that some notes will be passed to him over the next minute. Since our 1973 Bill, there have been major developments within the EEC in its approach to company law. Even regarding this No. 2 Bill as a temporary and modest measure, we should all like to know whether it conforms to the fourth and fifth directives on company law and whether it appears to fit in with the EEC draft regulations on company law which will lead eventually to the formation of the Euro company.
There is a further point on this that I should like to make to the Under-Secretary and to the Parliamentary Secretary to the Law Officers' Department. I do not believe that it is necessary for all


EEC companies to make the type of disclosure that is required in this country and that will be enforced by the Bill. If this is not so, it gives EEC companies an advantage over the single-product companies in the United Kingdom. The EEC competitor can look at the costs of the United Kingdom company and find out just what its profit margin is but the same information is not available to the United Kingdom manufacturer about his EEC competitor. It is most important to keep in line with the EEC on this, not just from the point of view of conformity with its statutes, but in order to see that we are not putting burdens on United Kingdom companies that do not apply to their EEC competitors.
All of us, with the exception of my hon. Friend the Member for Kensington, feel that this is a Bill that we would not wish to vote against, but which nevertheless could have been more substantial. At the risk of incurring the wrath of the Under-Secretary, I must remind him of the Latin tag —"Parturiunt montes; nascetur ridiculus mus". No one would call this a ridiculus mus in view of the requirements on auditors and the added powers that it gives to them. But it is a parvulus mus—too small a little mouse. This I regret, because I do not believe that the Under-Secretary and his colleagues will have time to bring forward a more substantial Bill before the next election. Other matters could have been logically included which would have made it a better and more useful Bill.

12.37 p.m.

The Parliamentary Secretary to the Law Officers' Department (Mr. Arthur Davidson): The hon. Member for Worthing (Mr. Higgins) in his opening remarks said that this was a Committee stage without a Second Reading. I am not one to look a gift horse in the mouth, particularly if it is offered by hon. Gentlemen. Therefore, I do not think that the Committee will expect me to deliver a lengthy winding-up speech. At one stage I hoped that it would not want a winding-up speech at all, but many points have been raised. Many of them were Committee points, as I think hon. Members themselves acknowledge, and would be better dealt with in Committee. Perhaps I may deal with one or two of the more general points that were raised. If I do not

deal with all of them, I am sure that the Committee will realise that, as the hon. Member for Caernarvon (Mr. Wigley) and my right hon. Friend the Member for Luton, West (Mr. Sedgemore) seem to expect that we shall be closeted here for several months, there will be ample time to discuss all these points. As the hon. Member for Caernarvon is an accountant and my hon. Friend is a lawyer, I do not doubt that that is a reasonable assumption.
The hon. Member for Worthing mentioned inflation accounting. The Government must await the detailed proposals of the group set up by the Accounting Standards Committee to implement the Sandilands Report. The hon. Member suggested that legislation was not necessary, but the Government are not yet in a position to decide whether legislation is necessary.
The hon. Member for Worthing also suggested—and the point was taken up by the hon. Member for Mid-Sussex (Mr. Renton)—that insider dealing should be dealt with in the Bill. My hon. Friend has given a detailed and uncontroversial explanation of why that is not thought necessary by the Government.
The principal ground on which the Government considered that the insider dealing provisions in the 1973 Bill were inadequate was that the provisions for civil liability would be difficult and in some cases impossible to enforce. As my hon. Friend has said, the whole question of insider dealing is being looked at and considered in the context of the inquiry into the securities market. I hope, trust and believe that legislation will be brought before the House before long.
My hon. Friend the Member for Bradford, North (Mr. Ford) suggested that there was a shortage of auditors. There is no evidence of any such shortage. With regard to his other point, which was also made by the hon. Member for Worthing (Mr. Higgins), my right hon. Friend the Secretary of State is not satisfied that the criteria required are met by anyone other than those listed in Clause 13. He will consider very carefully any application.
It was suggested by my hon. Friend that an appeal procedure was necessary. I do not think it is, and that is also the view of my right hon. Friend, who, I can


tell my hon. Friend, does read Hansard. If my hon. Friend has any documents that he wishes to send to him, my right hon. Friend will consider them with his usual uncontroversial care and very promptly.
My hon. Friend the Member for Bradford, North, has entered the room at exactly the wrong moment, because I have just dealt, very adequately, I think, with the points he raised. If I have not done so, I assure the Committee that I am prepared to report back at Committee stage.
A question was raised on the printing of accounts. The hon. Member for Worthing (Mr. Higgins) suggested that this could raise unnecessary difficulties, particularly for small companies; it would be unduly onerous to require small companies 10 print accounts. This point was raised when the Bill was debated in another place. Since the provision appears to have caused some confusion, the Government will be tabling an amendment in Committee to delete the requirement from Clause 1 and will rely instead on the powers in Clause 25 to make regulations specifying the reproduction processes which will be acceptable. I am sure the Committee will agree that this will help small companies considerably.
The hon. Member for Worthing also twitted my hon. Friend, which is a very dangerous thing to do, about staff savings and suggested that the 1973 Bill would have saved far more in staff and money than does the Bill. The 1973 Companies Bill included certain clauses streamlining the administration of the insolvency service which would have resulted in substantial staff savings. The relevant clauses are now in the Insolvency Bill—I regret that I have not had the privilege of serving on the Committee considering that Bill. It will produce substantial staff savings, so the hon. Gentleman's point was not perhaps relevant.
The hon. Gentleman also raised the point of the London and Counties Committee of Inquiry. The inquiry is proceeding, but I cannot give an assurance that it will report before this Bill completes all its stages. Most of the problems, as he will appreciate, concern the conduct of auditors and are properly matters for the profession and not for legislation. It would not be right to delay the Bill for this reason. There have been

enormous developments in accountancy practice over recent years. These will continue, and the Government will seek to include in legislation the best available method.
Hon. Members opposite criticised the criminal penalties in Clause 4 on the grounds that they were too severe.

Mr. Loveridge: It was not the general severity but the fact that they applied to tens of thousands of people to whom they need not apply and who could be eliminated from the fear by simple administrative measures.

Mr. Davidson: Certainly the hon. Member for Worthing (Mr. Higgins) criticised them on the ground that they were too severe. They are considerably more severe than the present penalties and, as I am sure the Committee would agree, rightly so. The present penalties are inadequate. But, as my hon. Friend pointed out, the criminal penalties are the maximum and courts seldom impose maximum penalties. They have considerable discretion and only in the most severe case would the courts fine up to the maximum.
In addition, it will be a defence if a person shows that he took reasonable measures to ensure that the requirements were complied with. If. therefore, a director were ill and in those circumstances he would take such steps, it would be very unlikely that proceedings would be taken. If he established such a defence, the court would listen to it sympathetically.
My hon. Friend the Member for Luton, West made some interesting points, as he always does. I do not want to intervene in the correspondence which he is having with my hon. Friend the Under-Secretary of State for Trade, who is looking at those points as a matter of urgency. I am sure my hon. Friend would accept that it would be better to deal with it in that way, but if he wants to raise the matter again during the Committee stage, I am sure that my hon. Friend the Under-Secretary of State will deal with it more fully than I could.
The hon. Gentleman mentioned the need for enforcement in filing accounts I am sure he realises that the purpose of Clauses 1 to 11 is to make the filing of accounts requirement enforceable.
The hon. Member for Caernarvon made a very interesting speech. He has considerable knowledge of the points raised about the Welsh language, which is not entirely unexpected. I accept that the position of the Welsh language under the Companies Act remains obscure in a number of areas. As he will appreciate, the Bill is of a strictly limited nature; its dimensions are limited for the reasons that have been repeated, perhaps ad nauseam. It has not been found possible to deal with the Welsh language problems in the Companies Act in the context of this Bill. However, I can assure him that it is likely that the next major Companies Bill will contain a Welsh language clause. No doubt the hon. Gentleman will return to the subject in Committee, arid perhaps I could better deal with it then. The hon. Gentleman also raised other points of a technical nature, which I think he will agree could also be better dealt with in Committee.
It is always interesting to listen to the hon. Member for Kensington (Sir B. Rhys Williams) on these occasions. I have heard him speak in the House, and what he says is always very interesting. I know that he has been persistent in moving his own Bill, and in speaking, on these matters. He spoke about widening the scope of the audit. He will not be surprised to know that, in our view, this matter is related to the Bullock Committee. If it recommends two-tier boards on continental lines, this would introduce a new concept for the supervision of management. Therefore, any changes in the scope of audit would have to be

THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:


Williams, Sir Thomas (Chairman)
Loveridge, Mr.


Berry, Mr.
Renton, Mr. Tim


Davidson, Mr. Arthur
Rhys Williams, Sir Brandon


Davis, Mr. Clinton
Sedgemore, Mr.


Ford, Mr.
White, Mr. Frank R.


Higgins, Mr.
Wigley, Mr.


Lamond, Mr. James
Woodall, Mr.

looked at on this basis. Some of the EEC directives to which my hon. Friend the Under-Secretary of State for Trade referred contained proposals on this subject, but again I think that is a matter which could best be dealt with in more detail in Committee.

I think I have dealt with most of the points that were raised. Contrary to what the hon. Gentleman considered is the nature of my hon. Friend the Under-Secretary, I am endeavouring to make relatively controversial matters uncontroversial. I shall not rise to the bait of the hon. Member for Mid-Sussex (Mr. Renton) and debate at great length the question of the need for the Bullock Committee and whether the important matters it is considering ought to be dealt with in the Bill. No doubt he will refer to it over and over again in the months ahead.

It has been acknowledged that the Bill is of strictly limited nature. It deals with technical matters. However, it introduces some important and much-needed reforms and safeguards in company law, and, despite the fact that the hon. Member for Kensington seems to be mildly against it, and although the Committee would have wished more to have been included in it, I think that it has received a general welcome.

Question put and agreed to

Ordered,
That the Chairman do now report to the House that the Committee recommend that the Companies (No. 2) Bill [Lords] ought to be read a Second time.

Committee rose at eight minutes to One o'clock.